Seller’s Market or Buyer’s Market

Written by Jon Quincy, Industry Expert and Managing Broker with Berkshire Hathaway HomeServices PenFed Realty  

Seller’s Market or Buyer’s Market   What do those terms mean?  You hear from time to time that it’s a seller’s market. A few years ago you might have heard that it was a buyer’s market. What are the differences between the two? Who has the power to decide whose market it may be? Well, it’s a little more complex than that.     There are a number of factors that go into which side of the fence the market lands. The first time I heard this term was a number of years ago as the market was shifting. We use the measurement of  “months supply” of inventory to see where the needle will point. I do feel that the pivoting point has shifted in the last few years because the market has changed, and now has leveled out. To define “months supply,” we look at the rate properties are selling. We take a specific time period and then divide the total number of active listings in that time period by the number of properties that went under contract in the same time period. This calculation will show how long it will take to deplete the inventory if no more new homes went on the market.   We used to say that a balanced market was a 6-month supply. Above 6 months is a buyer’s market and below 6 months is a seller’s market. I would guess that number has lowered in the last few years. We have not seen above a 3 months supply for about a couple of years. Depending on how criteria-specific you want to be, it can change the month supply quite a bit. For instance, if you break it down in price ranges, it will look a lot different in the $100k-$225k market in the SCK MLS than in the higher price points. There are some price points, or school districts for that matter, that might look like weeks— or even days— of inventory.     As for “buyers” or “sellers,” that is more or less who would be considered to have the negotiating advantage in a specific market. However, as mentioned above, there are a number of factors that could change that direction very fast. Here are some of those factors: the motivation of either party, the timing of jobs or schools, the way in which a buyer is financing, or if the seller has to sell his/her home first before they can turn around and buy a new one.   During the last few years we have explained that it is a great time to sell! However, we constantly have to remind you of the challenges you face if you are a buyer in this market. As a buyer you might feel that the seller is not being as reasonable as you believe he/she should be. On the other hand, Mr. and Mrs. Buyer, don’t forget the historically low interest rates that you get to take advantage of! The seller is looking at the fact that people were lined up at the front door wanting to buy their home, so they may not feel a need to negotiate as much. Half of the time a transaction might be a business decision, and the other half of the time it may be an emotional decision. Those types of decisions can be forgotten by all parties!   As real estate professionals, we should ALWAYS coach our clients to make the best decisions that will help them get to their desired outcome with as little stress as possible.     Happy Negotiating!   Jon Quincy Managing Broker Berkshire Hathaway HomeServices PenFed Realty