The quickest explination is that a Seller’s Market is when there are more active buyers than available listings. And a Buyer’s Market is when there are more listings than buyers. However, let’s explain what we use to measure the market and what that means for sales prices!
Below are the major factors that push us into a Seller’s market or a Buyer’s market:
- Interest Rates
- Inventory of homes
- And, Legislation
In the GTA, we suffer from a chronic housing shortage. Often times, we find ourselves pushed well into seller’s markets. But every so often, we’re thrust back into a buyer’s market when we encounter economic instability. That can come from pandemics, changes in legislation, and most recently, inflation and extraordinary interest rate hikes.
We were pushed from a severe seller’s market, into a balanced / buyer’s market within a year, but it might not last for too long.
How Do You Measure A Buyer’s Market Vs Seller’s Market?
We look at two things when measuring the type of market we’re in: The number of homes for sale, and the number of sales per a month. We call this Months Of Inventory. More than 3 months of inventory is called a Buyer’s market, and less than 3 months of inventory a Seller’s market.
- An example of a Buyers’s market: Say in any given month we sell 1703 Detached homes, but there are 4,862 listed for sale. If no more homes listed for sale, it would take 4.2 months to sell all the homes. This is a 4.2 MOI. (A buyer’s market).
- However, say there are 1238 sales and we only had 2,521 homes for sale in the same month. That would give is 2.1 months of inventory. (A seller’s market).
In a Seller’s market, prices are usually appreciating, and in a Buyer’s market prices are either stagnant or dropping.
At the end of the day, a balanced market suits everyone better. Homeowners feel freer to upsize or downsize because there is more inventory and fewer bidding wars.