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What is a Buyer’s, Seller’s and Balanced Market?


The phrases buyer’s market, seller’s market, and balanced market are often heard in real estate. It is paramount for both buyers and sellers to be able to distinguish between the market phases in order to gain insight and the largest possible benefit from a current market phase.


What is a Buyer’s Market?

A buyer’s market indicates that there may be a potential advantage to purchasers due to the factor of housing supply exceeding consumer demand. In a buyer’s market, houses may sell for less or may need to stay on the market longer hence giving interested buyers leverage over sellers. There may be more listings than average available on the market and pricing can be stable or decreasing. In this situation, the competition will often be between sellers as there would need to be more effort placed into enticing buyers. A buyer’s market is ideal for buyers as there is a larger assortment of inventory available, and many sellers will be more open and flexible in negotiation. During a buyer’s market, buyers should take their time to research and view as many properties as possible in order to take advantage of the large array of listed properties.


What is a Seller’s Market?


A seller’s market indicates that there may be an advantage for sellers due to the factor of consumer demand exceeding the available housing supply. Since consumer demand exceeds the housing supply on the market, sellers are at an advantage over buyers. In a seller’s market, properties can sell at a faster rate resulting in competition between buyers. Hence, sellers often have the option of raising prices. In a seller’s market, sellers can experience multiple offers for higher than listed or assessed prices for properties due to bidding wars. Bidding wars result when buyers make competing offers and drive up the price of the property.


What is a Balanced Market?


A balanced market indicates a situation where it would likely be beneficial to both buy or sell. In a balanced market, there is generally not a large gap between consumer demand and housing supply. The prices remain fairly competitive with a lower level of urgency. However, as the market balances out, buyers are often more encouraged to purchase a property which can lead to a seller’s market.


How Long does a Market Remain in one Phase?

A real estate market is cyclical and will often swing from one phase to another depending on factors such as level of supply, demand and other external economical influences. If a current market phase brings benefit to your situation, it is critical to take advantage before the market changes.


How to Find out the Current Market Phase?

The sales-to-active listings ratio can assist you in recognizing a buyer’s, seller's or neutral/balanced market. For the ratio to be used effectively, it is critical to understand the benchmark percentage. Once the ratio goes below 12%, there may be a decline in prices which would result in a Buyer’s market. On the other hand, a seller’s market typically has a ratio of over 20% and an increase in prices. It is critical to note that detached, condos and townhomes will all vary in terms of their sales-to-active listings ratio.

 



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