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 have the perfect combination of sustained low-interest rates, high employment, high immigration, and a stable political environment. This led to a strong Seller’s market, but the government is trying to balance our market with legislative changes and interest rate hikes.
The interest rate hikes, the mortgage stress test, and the 15% foreign buyer’s tax helped cool what was a severe Seller’s Market, and moved us into a more balanced market. Which is good for everyone. But not every market has balanced. There is still a strong Seller’s Market in the entry-level price ranges across the GTA.
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: In January 2019, 1703 Detached homes sold in the GTA while 4,862 listed for sale in the same month. This meant we have 4.2 months of inventory, or a Buyer’s Market.
- However, we aren’t experiencing a buyers market across all house types. There were 1, 238 sales of Condos in the GTA in January 2019, and we only listed 2,521 homes in the same month. So, we only have 2.1 months of inventory of condos across the GTA and are therefore in a Seller’s Market.
(This would be a good market for someone living in a condo to move into a detached home).
In a Seller’s market, prices are usually appreciating, and in a Buyer’s market prices are either stagnant or dropping.
A balanced market suits consumer buying styles better. In a balanced market, there is less pressure to make purchases, and there is often more inventory to choose from. In a balanced, or Buyer’s Market, prices usually drop a little, compared to a Seller’s market.
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.