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The Truth Behind Home Price Increases

Everyone knows that rising home prices equate to a sellers' market. Sellers can afford to hold out for top dollar because buyers are rushing to beat higher prices.

Well, not exactly. Real estate data firm Zillow has a more refined way of looking at it, defining a sellers' market as "not necessarily one where home values are rising, but rather one in which homes are on the market for a shorter time, price cuts occur less frequently and homes are sold at prices very close to (or greater than) their last listing price."

The buyers' market is, as you'd expect, the opposite: "Homes for sale stay on the market longer, price cuts occur more frequently and homes are sold for less relative to their listing price."

Prices may indeed be rising quickly in sellers' markets and falling in buyers' markets, but price change alone is not the key factor.

So whether you are a buyer or seller, with a little research you can figure out who has the negotiating edge on the table. Lots of this data are online or via just simply chatting with your real estate agent.

The main takeaway is that Zillow's approach makes for good debate, especially now that realtors are going about spring and summer selling season. Based on Zillow's numbers, the West Coast is a seller's market, while the Midwest and East Coast favor buyers. In the recent post-crisis years, the whole country tended to move in the same direction, but now, in a return to more typical behavior, local variations are reasserting themselves.

West Coast vs MidWest vs East Coast? What's the difference

Relatively strong job markets in the West are helping spur robust demand, which is being met with limited supply, causing rapid home value appreciation and giving sellers an edge. In the East however, housing markets are appreciating a bit more slowly, and homes are staying on the market longer, which helps give buyers the upper hand. In general, buyers in sellers' markets this spring can expect tight inventory, increased competition and a greater sense of urgency. Sellers in buyers' markets may need to be prepared to lower their asking price, or to wait longer for the perfect buyer to come along.

While buyers and sellers tend to focus on a home's price, location and features, it's worth spending some time to gain insight into the local market. As a buyer, you are competing with other buyers, and if they understand it's a sellers' market and you don't, one of them might strike a bargain while you're still hanging tough. Sellers, too, need to know whether they can safely hold the line or compromise.

A good real estate agent can offer some guidance. But remember, an agent may prefer to give up a little commission to sell the home in weeks rather than months. Advice to be "realistic" -- to pay more if you're a buyer or settle for less as a seller-- may be an effort to speed the process rather than get the best possible deal. So it's best to develop your own view of who has the upper hand when you start to haggle.

Interested in buying or selling this coming season? Talk to us about it. Call (617) 505-1781 now or tweet us @BostonIRE to get the best no-nonsense advice in town!

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