Do you remember in your social studies classes – government and economics – when you studied the laws of supply and demand? Perhaps you looked into the subject more deeply in college with a marketing, advertising, or finance course. Unfortunately, this is one subject you will have application for throughout your life, especially in terms of real estate investment. The entire market is simply one big cycle that is driven by supply and demand, and when demand for real estate is greater than the available supply, you have what investors refer to as a seller’s market.

There are signs that will predict the beginning of a seller’s market, allowing investors to prepare to sell for the highest possible profit. Here are a few to consider:

• Lower interest rates. When the fed cuts interest rates, it makes mortgage loans less expensive and less risky, meaning that more individuals qualify for a standard bank loan. This creates an overabundance of excited buyers who are now able to afford to purchase the home of their dreams. There will not be enough real estate on the market to meet the demand.
• Increased prices for real estate. With the law of supply and demand at work, the lack of supply to meet the demand allows sellers to charge the prices they want, and competing buyers will pay the prices asked to get into the market. This means an increase in property value and an increase in real estate costs.
• Increase in building. Knowing there is a market for homes, builders will increase their rate of residential development to try to cash in on the run on real estate, eventually helping to steady the market.

In a seller’s market, you want to be in the market, holding property that you can sell at your own demanded price. However, you can make money even if you are buying in the seller’s market, if you have the proper training as an investor. In fact, the biggest problem that causes people to lose money through real estate investment is jumping in without the proper training, being uninformed and simply purchasing in order to claim real estate.

In order to make money purchasing in a seller’s market, you have to avoid the temptation to purchase your real estate at retail value. If you find that you can’t get into discounted real estate or property sold at less than market value as property values continue to inflate, the best thing to do is get a better training from qualified teachers who make money in any market with minimal risk. There’s never a bad time to buy real estate if you do it correctly.

A seller’s market is driven partially by the lending environment, but this is not the driving force. Supply and demand are the most important aspects of the market, and you can judge the appearance of this situation by watching carefully the trends in available real estate.

Author's Bio: 

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