Defining Buyer’s, Seller’s, and Balanced Markets

Published March 13, 2018 by Real Estate Leads

For a new realtorBusinesspeople at a meeting in the office, it won’t be difficult to understand the basic nature of these terms and how they relate to the local Real Estate Market, and what types of pricing and inventory conditions would promote them. But it’s helpful to have a more thorough and fundamental understanding of them, as being able to relate how current market conditions will affect your clients home sale or home purchase process is a significant part of what will make you a knowledgable realtor and one that is thus held in high regard by those clients.

Here at Real Estate Leads, our online real estate lead generation system for Canadian realtors has been very beneficial to realtors who want to hit the ground running with their prospecting efforts. Resources are always best paired with insight and understanding. While all new realtors will have an expanse of it following their becoming certified, it’s always helpful to go the extra distance when you can.

So today let’s look at what makes up a buyer’s, seller’s, or balanced market in greater detail.

It’s a little more detailed than a simple grasp of a seller’s markets meaning conditions are favourable for sellers to get higher prices for their homes, buyer’s markets allowing buyers to come in at lower prices, and balanced markets being balanced.

One of the Three

These three market labels are generated in relation to housing supply and demand, and they’re related explicitly to statistical data. A standard way of measuring and classifying the market is to evaluate the sales-to-new-listings ratio. The comparison between the volume of sales in a given market compared to the volume of listings coming onto the market indicates how much demand there are for houses in that area and how many qualified buyers are legitimate prospective buyers for those homes.

A seller’s market is one where the sales-to-listing ratio is generally at 60% or more, translating to six or more sales for every 10 new listings. A balanced market will have a ratio between 40% and 60%, while a buyer’s market will have less than four sales for every 10 new listings.

We can also measure market activity by looking at the rate at which homes are currently selling, or the number of months of inventory – or MOI as it’s referred to. The Canadian Real Estate Association (CREA) states that the MOI indicates the duration of time it would take to liquidate current inventories entirely at the current rate of sales activity. If we are to follow this measure, a seller’s market is in place when the MOI falls at or below four months.

A balanced market falls between four and six months, and a buyer’s market is when the MOI is in excess of six months.

In Practice

Crunching numbers isn’t an absolute necessity to have a sense of what kind of market you’re in, however. A preliminary idea can be formed by paying close attention to what’s going on in your neighbourhood. If you’re in a seller’s market, you’ll start to see a large number of qualified buyers competing with each other for a small number of homes. This allows the home sellers to increase their asking prices – and often receive exactly what they’re asking for, or more. With this lack of inventory, seller’s markets can push buyers to make stronger offers with shorter closing dates, few or no conditions, and even cash deals in some instances.

Buyer’s markets, oppositely, can force sellers to be more competitive with their prices and often result in homes being on the market much longer than they would be in a more balanced market.

Seasonal Influences

Most markets across Canada share the fact that summertime is a great time to buy or sell, independent of the current market type. A realtor should have a sense of conditions in their neighbourhood, and clients rely on the realtor to guide them accordingly. While this applies to buyers too, it is of particular importance to clients selling their home.

There will nearly always be varying degrees of supply and demand at play, but individual factors like local property developments or plans for expanded civic infrastructure, for example, can affect prices. Aim to be a real estate professional who can accurately inform their client whether or not they’re selling for the right price or buying at the best price possible. It’ll do wonders for your renown with them, and in the big picture your reputation overall.

Sign up for Real Estate Leads here and receive a guaranteed monthly quota of qualified, online-generated buyer, seller, or buyer AND seller leads delivered to you exclusively and for your similarly exclusive region of any city or town in Canada. It’s a smart investment for any realtor who needs to get much more out of their prospecting efforts early in their career.