đ¤âWhat are Buyerâs, Sellerâs, and Balanced Markets?âď¸đď¸
Whether itâs when spring temperatures start to climb and snowy yards give way to green growth, or summer is over and everyone is back to a regular routine, buyers and sellers start pushing the real estate market into high gear. Itâs during times like these that we start to hear the terms âsellerâs market,â âbuyerâs market,â or âbalanced marketâ being tossed around, and itâs easy to get a general sense of what they mean: sellerâs markets mean conditions are favorable for sellers to get higher prices for their homes, buyerâs markets allow buyers to come in at lower prices, and balanced markets are, well, balanced.
To get a little more precise, these market labels indicate whatâs occurring in terms of housing supply and demand, and theyâre actually based on statistical data. One way of measuring and classifying the market is to look at the sales-to-new listings ratio. This ratio compares the number of sales in a given market to the number of listings going on the market, revealing how âin demandâ the houses are in that area and how many qualified buyers are on the hunt. In a sellerâs market, the sales-to-listing ratio is generally at 60% or more, which translates to six or more sales for every ten new listings. In a balanced market, the ratio is between 40% and 60%, and in a buyerâs market, youâre looking at fewer than four sales for every ten new listings.
Another effective way of measuring market activity is to look at the rate at which homes are selling, or, the number of months of inventory (MOI). According to the Canadian Real Estate Association (CREA), the MOI indicates âhow long it would take to completely liquidate current inventories at the current rate of sales activity.â According to this measure, a sellerâs market occurs when the MOI falls at or below four months, in a balanced market it falls between four and six months, and a buyerâs market is when the MOI is more than six months.
Of course, you donât necessarily need to crunch numbers to have a sense of what kind of market youâre in â you can get a preliminary idea by listening to whatâs going on in your neighborhood. What we start to see in a sellerâs market is a large number of qualified buyers competing for a small number of homes, allowing sellers to drive up their prices. As a result of the lack of inventory, sellerâs markets can push buyers to make bolder offers with shorter closing dates, few or no conditions, and even cash deals. Buyerâs markets, on the other hand, can force sellers to be more competitive with their prices, and often result in lengthier times on the market.
In a fairly balanced market, it’s a great time to buy or sell. Before you decide to take the plunge as a buyer or seller, consult with your local relator; he or she will help you understand the market conditions where youâre selling, buying, or both! Your agent will have insight into current supply and demand, as well as factors like property developments in the area, or plans for improved infrastructure that can affect prices.
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