Buyer’s vs Seller’s Market
I’m often asked, “How’s the market?”
Many people asking that question refer to it in terms of a Buyer’s Market or a Seller’s Market. Most have an understanding of the difference but few realize there is an actual calculation in deciding what the type of market we're in.
A buyer’s market indicates that there is more supply than demand. In other words, there are a lot of houses on the market but few buyers. As in any market, the more plentiful a commodity is, the cheaper it becomes. Sellers finding themselves in a buyer’s market may end up taking less for their property than they wanted in order to get it sold.
Conversely, a seller’s market indicates that buyers are plentiful but the number of homes for sale is low. As buyers scramble to find a home, sellers enjoy being able to ask higher prices and may be seeing multiple offers with very short periods of time on the market.
So, how do we tell if a market is actually a buyer’s or seller’s market? We create a Market Barometer by dividing the number of sales over a period by the number of homes for sale in that same period. A threshold of +0.10 or higher indicates more of a seller’s market while -0.10 or lower indicates more of a buyer’s market. Anything in between +0.1 and -0.1 indicates a Balanced Market.
O’Fallon’s Market Barometer indicates the market is currently balanced but has been moving from a seller’s market to a buyer’s market over the last three quarters.
It’s important to note that real estate markets are extremely local. There can be both buyer and seller markets happening simultaneously within a region, county, or even city based on popularity of subdivisions, schools, etc…
Compare Belleville’s market below with O’Fallon’s during the same time period. These neighboring cities have different markets. Belleville’s market has remained consistently balanced with relatively steady sales and less dramatic changes in inventory.
Whether you are buying or selling, knowing the market and the direction it is moving is
critical to developing your negotiation objectives when entering into a transaction.
"How’s the market?” is a simple question with a complex answer.
It depends:
Are we buying or selling?
What area are we talking about?
What price range are we talking about?
How soon do you want to move?
So, “How’s the Market?” I’m glad you asked. Grab a chair and cup of coffee. Let’s talk about it.
Stay on top of the market, with my free Market Snapshot report that will tell you what the market is doing near you. Or, feel free to contact me for analysis on what the market is doing in your city.
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