What determines Ontario real estate market conditions in 2014? Pricing of a home is the same thing as the pricing of anything; it is based on supply and demand ‐ how much of that item is available, and how many people out there want to purchase that item.
When you discuss homes, if you have less than six months’ inventory, that means there are not enough homes out there to satisfy the number of potential buyers. The result is that the buyers fight over the available inventory. How do they fight? By price… which causes prices to appreciate. So, when you have less than six months’ inventory – prices will continue to go up.
Between six and seven months’ inventory, you’re pretty much at a neutral market, meaning the number of houses for sale and the number of buyers are roughly equal. Home prices will still appreciate, but just by the level of inflation, not because of market conditions.
If you have greater than seven months of inventory, it means that there are not enough buyers for the number of homeowners that want to sell their homes. Sellers have to fight over buyers. How do the sellers fight? The same way – by price. Sellers have to lower their prices to attract buyers, because buyers have so many other choices. Anything greater than the seven months is a buyer’s market. In a market with 7+ months of inventory, home prices will depreciate as the sellers fight over those buyers, again, by lowering the price.
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