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What Goes Into Home Prices in a Competitive Market?

If you’re selling a home in a competitive market, you know you’re likely to have more interested buyers, better offers, and a quicker transaction process. But, it’s important to manage your expectations by understanding what determines house prices and home sales. 

Local Market Conditions

If there’s a lack of inventory in the area, it’s likely that you could price your home a little higher. If a new home hits the market in an area where there are lots of buyers and very little inventory, buyers will be eager to see it. And, it’s possible that you’ll receive offers above the asking price if buyers see that other buyers are interested in the home, too. 

Buyer Preferences

The condition of the home can affect your pricing. Some buyers may be specifically looking for a fixer-upper, but a lot of buyers in a competitive market may be looking for a move-in-ready home. And, some buyers may have preferences on proximity to schools, highways, trains, and other amenities. 

In the wake of the pandemic, buyers may also be looking for additional space in and/or outside of the home. Home offices and patio spaces are two examples of this.


Historically, seasonality has been a factor in home sales. 2020 was an exception to this rule because strong home sales extended into fall & winter. Existing-home sales in November were up almost 26%, and sales prices nearly 15% from the previous year, according to the National Association of REALTORS®.

Home transactions and prices traditionally trend up in the summer when home shopping activity is high. And, Americans have higher mobility rates in the summer when school is out of session. 

Mortgage Rates

Low interest rates make homes more affordable for buyers. But, the lack of inventory on the market has created stiff competition among buyers. This often results in bidding wars and nullifies the benefit of the low rates. According to Redfin, record low interest rates have increased home buyers’ purchasing power by 6.9%. But higher home prices have cancelled out the effect.


Low inventory and higher home prices are compromising many buyers’ ability to afford a home. Sellers should be prepared to make adjustments for the buyer if necessary. Working with a buyer will help the transaction go quickly and smoothly for both parties.

Work with the Right Agent

The state of the whole country’s real estate market is different than the state of the market in your city or neighborhood. Work with an agent who can give you proper guidance on your local market.

Team Melton has over 50 combined years of real estate experience to assist you through every step of the process. Contact us today to get started on selling your home!

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