Buyers or Sellers Market? Real Estate Terminology
A Buyer’s Market: In a real estate market with 7 or more months of inventory we consider the buyer to have more negotiating power. There are more houses on the market and buyer’s have more choices. We usually see depreciation. (from 2007 to 2011)
A Seller’s Market: In a real estate market with 1 to 4 months of inventory we consider the seller to have more negotiating power and we usually see home value appreciation. Buyers have more competition as there are fewer homes on the market. (from 2001 to 2006)
A Balanced Market: In a normal market with 5 to 6 months inventory the conditions are even. In late 2011 and 2012 we’ve seen a balanced real estate market in Frederick Maryland. Now that the demand is up and the inventory is down, we’re seeing the turn to a buyer’s market again.
Calculating Months of Inventory
The number of months of inventory means that if there were no more new listings, it would take X months to sell the homes currently on the market. We also use the term Absorption Rate, and also talk about the number of “Days on the Market”
When we calculate the months of inventory, we usually take the last 3 months into account. We can fairly determine that it will take X number of days to sell a home, on average. These calculations are important, because if we see a home linger on the market for more than the average time, we can assume that the price is too high, or the condition of the home is not good.
What Does this Have to Do with Buying or Selling?
Good Question! The explanation is found in Days on Market – How it Affects Real Estate. Knowing the average days on market in the area where you are buying or selling is very important in helping you determine an approximate asking or offering price on a home. Read more.