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Seller's Market vs Buyers Market

"It's a seller's market" and "Buyers Market" are phrases you may have heard often. So, what is a seller's market, what is a buyer's market, and how are they determined?


Seller's Market & Buyer's Market:




As I've mentioned in previous posts, and as many of you may know, prices are determined where market demand and supply intersect. In other words, if supply is higher than demand (fewer people want an item than the quantity available), prices decrease, and if demand is higher than supply (more people want an item than the quantity available), prices increase.

Therefore, if supply is higher than demand, several sellers will try to sell goods to a limited number of buyers, creating favorable conditions for buyers. This situation is known as a Buyer's Market. In real estate, this occurs when the number of houses on the market is much higher than the number of people wanting to buy. The subprime mortgage crisis is a good example of this.



Conversely, if demand is higher than supply, with a limited number of goods, many buyers will compete for them, leading to favorable conditions for sellers. Prices will naturally rise. This scenario is called a Seller's Market. In real estate, this happens when the number of houses on the market is much lower than the number of potential buyers. In 2021, many suburban markets experienced a classic seller's market post-COVID-19.


How can we diagnose a seller's market or buyer's market in real estate?


A realtor I work with provides the necessary information, and the process is quite simple:

  1. Calculate the average number of houses sold per month over the past few months or the last year.

  2. Divide the current number of houses on the market by the monthly average sales figure.

The resulting number is referred to as inventory in real estate. In the industry, an inventory number between 6 and 7 is considered a Neutral or Balanced market. This means it is neither a seller's nor a buyer's market.


However, if the inventory number is greater than 6-7, the market is considered a buyer's market. Conversely, if it is lower, it is a seller's market.


During the subprime crisis, there were numerous areas with an inventory number exceeding 14, making it a buyer's market. In contrast, during the 2021 COVID-19 peak and low-interest rates, the inventory number was around 2.4-2.6.


I hope this explanation is clear. If you have any questions, feel free to contact me. I'll address your inquiries in the next post.



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