Seller’s market, buyer’s market and balanced market are terms that are typically used to describe the real estate marketplace. Understanding each will help you to better appreciate what is happening in the real estate market and how you might approach the market if you are looking to buy, sell or rent.
Each market is determined based on the ratio of potential buyers to properties for sale and may differ from region, city or even neighbourhood. For example, while Ottawa may be experiencing a seller’s market, other regions may be in a buyer’s or vice versa. Below, I will explain the circumstances that create each type of market and highlight how they influence transactions within them.
A seller’s market happens when the property inventory (number of homes for sale) represents a shortage of homes available for purchase relative to the number of buyers looking to make a purchase. This can be beneficial for sellers by creating more competition amongst buyers and has the potential to drive prices up due to increased demand and in some instances attract multiple offers for their consideration. It is important to note that listing in a seller’s market does not guarantee a quick sale.
On the flip side, a buyer’s market is created when there are more homes available for purchase than there is demand from buyers interested in buying them. Buyers in a buyer’s market may benefit from more choice, price reductions and a greater opportunity to leverage negotiations in their favour.
Finally, a balanced market occurs when the inventory of homes for sale is balanced to the number of buyers seeking to purchase them. When the market is balanced, one can generally anticipate greater stability in market buying and selling conditions where the selling prices for homes does not necessarily favour the buyer or the seller.
Inventory is not the only factor that determines market type. Demand in the housing market is heavily influenced by such things as lender interest rates, unemployment rates, incentive programs, construction, immigration and local and world economies. The impacts of the current global pandemic are also very real and obvious factors that are influencing supply and demand and will continue to do so for the foreseeable future.
Many buyers and sellers will face both in short succession – when selling one home and buying another, you may find yourself navigating both sides of a market. Regardless of your reasons for buying or selling or which market you’re transacting in, it is important to understand the market conditions you will be entering. Also keep in mind that some segments of a market might be a buyer’s market while another a seller’s, for example detached houses might be a buyer’s market while condominiums are a seller’s market, or vice versa. Real estate salespersons are knowledgeable resources and can provide tremendous value in this area to their clients.
Contributed By: Joseph Richer is Registrar of the Real Estate Council of Ontario