Most people have heard the terms “buyer’s market” and “seller’s market”, but do you know what they really mean and how they are determined?
There are many factors which affect the real estate market – interest rates, employment, investment growth, legislative changes and new construction, to name a few. All of these factors influence the real estate market in some way.
In a buyer’s market, there are more homes for sale than there are buyers. This could be a result of high unemployment, fear of interest rate increases or other factors which make people think twice about purchasing a home for the first time or moving up into a larger home.
The advantage buyers have in a buyers’ market is that they can typically take their time and look at all of their options before buying. Buyers also have more options because sellers are more anxious to sell. Overall, home prices may go down in a buyer’s market.
In a seller’s market, there are fewer homes for sale to a larger pool of buyers. The factors at work could be sustained low interest rates, high employment rate, legislative changes which make it easier to purchase a property – events and conditions that make buyers think it would be a good time to buy a big ticket item like a home.
The advantage goes to the seller in a seller’s market – typically home prices will rise as buyers are quick to make an offer to secure the property; sometimes buyers will compete for a property, driving the price above expectations.
REALTORS® are the first to notice whether we are in a buyer’s or seller’s market – their business is helping sellers and buyers with their real estate needs and any change in the market affects how they work with their clients and customers.
There is also a statistical measure we use to determine what kind of market exists – it’s called the Sales-to-Listing ratio.
In any given month or period, the number of sales is compared to the number of listings taken. If the result is 55% or greater – there are 55 sales for every 100 listings – it is considered a seller’s market.
If the result is 35% or lower – that is, 35 sales for every 100 listings – it is considered a buyer’s market.
Anything in between is considered a balanced market.