What is a Buyer's Market, Seller's Market and a Balanced Market in Real Estate?

When you buy your new home in Nanaimo, you want to make sure you are getting the best possible value for your money. Once you start exploring the options, you start to hear the terms ‘buyer’s market’, ‘seller’s market’ or ‘balanced market’ being tossed around. It is easy to get a general sense of what the terms mean: a buyer’s market means conditions are favourable for buyers to get their homes at a lower price, a seller’s market allows sellers to sell at a higher price, and balanced markets are balanced. When you start looking for a house, you should first understand if the market is conducive to the goals at hand. Taking the temperature of the market right at the start is very important - a buyer’s market is ‘cold’ and a seller’s market is ‘hot’.

It is also important for sellers to understand the state of the Nanaimo housing market so they know what to expect in the way of pricing, activity and days on the market.

Let us now understand the concepts in detail:

Seller’s Market:

A seller’s market occurs when there are more potential buyers than homes or when there is a shortage of housing. Because of this shortage, sellers will often see several people competing to buy their property which will drive up the price of their property. This is a favourable situation for the sellers as they will get a great price for their homes. In this situation, buyers will have to pay more to beat out the competition.

A seller’s market would have an upward trend in home prices. Buyers will have to pay more to buy a property. Homes will sell quickly in a seller’s market so you see a decrease in the average number of days the home is on the market. You may even get multiple offers on the same homes. In a seller’s market, the buyer is inclined to bend to the seller’s demands. You may even see serious buyers often willing to pay more than list price. You may see buyers asking for fewer repairs and going for closings as per the seller’s desired timelines.

Buyer’s Market:

A buyer’s market is just the opposite of a seller’s market. A buyer's market happens when you have more supply than demand. It is when there are more homes for sale than buyers or there is a surplus in housing. This is an ideal situation for buyers because they can get a great deal. In a buyer's market, sellers may have to sell their homes at a lower price than the price they are expecting for their homes. They may even have to resort to staging and incentives to beat the competition and sell their homes.

A buyer’s market will see a downward trend in home prices. The houses may be listed on the market for a longer period because sellers may have to wait to receive the offer they are willing to accept. Since there is an excess of homes available, sellers are unlikely to get multiple offers for their property. In a buyer’s market, the sellers are often willing to negotiate.

Balanced Market:

A balanced market happens when there is the same number of homes for sale as there are buyers. This may seem to be a hypothetical situation as the number of homes for sale and the number of buyers available cannot be the same in any market at any given point of time.

Months’ Supply of Inventory or MSI:

MSI is the simplest indicative factor of whether we are in the buyer’s market or seller’s market. Months’ supply of inventory refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. The inventory typically refers to the number of homes actively for sale in a particular market. If the inventory in a particular market is low, it is most likely a seller's market.

It is important to remember that even within the same country or the same province, there can be several different markets. The trends might even change and a buyer's and seller's markets don't last forever. You need to study the current housing market you are interested in, to understand if it is a buyer's market or a seller's market. For the most part, life is good if you are a buyer in the buyer’s market and a seller in the seller’s market.

For additional information on the current state of the Nanaimo housing market please contact me.