How does high demand affect property prices in a seller's market?

In a seller's market, high demand for properties typically leads to an increase in property prices. This phenomenon occurs because there are more buyers than available homes for sale, creating competition among buyers. As buyers compete to secure a property, they may be willing to offer higher prices, sometimes even above the asking price, in order to outbid other interested parties. This heightened competition drives prices upward, reflecting the increased willingness of buyers to pay more in such a tight market.

Moreover, in a seller's market, there is often lower inventory, meaning fewer properties are available for sale. The combination of limited supply and strong demand creates upward pressure on prices, making it favorable for sellers who can take advantage of the market conditions. This dynamic is a fundamental principle of supply and demand in real estate and underscores why increasing prices is the typical outcome when demand is high in a seller's market.