What Pushes the Market?

By Jim Palmer Jr.

In the real estate business, brokers are frequently besieged with negative comments from folks who have little understanding about what makes the market tick. In a recent coffee-infused gab session, one such heckler emphatically insisted it was Realtors® who push the market upward (as if they have control over market trends). From what I could ascertain, the intent of the terse accusation was to advocate the idea that Realtors® intentionally over price listings to drive prices up so they make more money. Boy, don’t we wish we could manipulate the market towards positive numbers by simply jacking up listing prices! Most reasonable people understand that is a silly notion!

Supply and demand is really what drives the market swings. Of course a robust upswing in the general economy makes all of the difference. In our capitalistic society, every time there is a spike in prices, there is eventually a compensating purging effect and a down swing that follows. Socialist minded commentators think this ebb and flow is messy and unnecessary, while proponents of our freedoms insist this cleansing ability is one of the hallmarks of a free market.

Hecklers might consider this story; recently in a frenzied bidding war, six eager buyers escalated their offering price until there was a winner at a price well above the original listed price. The Realtor® who provided the market analysis and subsequently listed the property did not set the starting price, the seller did, and the winning buyer who was willing to pay the ultimate price was really the one who decided how much the property was worth. So to you hecklers out there, who was the greedy one in this scenario, the Realtor®, the seller, or the buyer who just had to have this particular property? Some might say that the buyers are the victims because they are forced by market conditions to bid high in order to obtain a place to live, but it’s hard for me to see this buyer as a victim. The buyer got what they wanted. The seller got more than they expected, and the Realtor® got exactly what they contracted for.

There is a saying among listing brokers that goes something like this, “That one willing-and-able-buyer is the ONE who decides what a property is worth.” While that may sound accurate to some, the truth may really be more complex than that.