In real estate, the terms “buyer’s market,” “seller’s market,” and “balanced market” are used to describe the conditions of supply and demand in the housing market. These conditions can greatly influence the dynamics of buying and selling homes so it’s important to understand what market you are in. In this post, I will explain how you can determine what type of market you are in and how that may affect you.
To calculate what type of market you are in you’re going to need to find out how many “months of inventory” are available. To do that you need to know:
1) How many homes are currently available or “active” in the area you’re researching and then
2) divide that by the average number of days it is taking for homes in that area to sell.
Remember it is important to use the most recent average for “days on market”.
- A buyer’s market occurs when there are more homes for sale than there are buyers actively looking to purchase.
- Generally, for it to be considered a buyers market there are 6 Months or more of Inventory available
- Buyers have the upper hand here because there is a surplus of properties to choose from combined with less competition which often leads to more favorable terms for buyers.
- If you are selling in this type of market you may need to lower your asking prices or offer other incentives to attract potential buyers to your home over the others.
- A seller’s market takes place when more buyers are looking for homes than there are homes available for sale and there are 4 or less Months of Inventory available.
- In a Seller’s market sellers have the advantage because of the high demand for homes which often results in increased competition amongst buyers.
- Sellers may receive multiple offers, offers over list price, less or no conditions and properties often sell very quickly
- Buyers shopping in a seller’s market may need to act swiftly and make competitive offers to secure a property. Ensuring your pre-approval is up-to-date is crucial, and shopping slightly UNDER budget is highly recommended.
- As the name suggests, a balanced market happens when the supply of homes for sale roughly matches the demand from buyers with approximately 4-6 Months of Inventory on the market
- In this market, neither side has any significant advantage, home prices tend to remain stable, and transactions overall tend to be less stressful.
- Buyers have a reasonable number of options, and sellers can expect fair market value for their properties