The factors in buyer’s and seller’s markets

I recently read an article that said we’re in a seller’s market. What does that mean?

Thank you for your question. It is important that buyers and sellers understand their real estate market before preparing to buy or sell a property.

Seller’s market, buyer’s market and balanced market are terms that are typically used to describe the real estate environment. Each market is determined according to 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 market — or vice versa. Let me explain the circumstances that create each type of market and how they influence transactions.

A seller’s market happens when the property inventory — or the number of homes for sale — represents a shortage of residences available for purchase relative to the number of interested buyers. This can be beneficial for sellers by creating more competition among buyers. It has the potential to drive prices up due to increased demand and, in some instances, attract multiple offers for a buyer’s 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 interested buyers. 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 do 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.

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 assistance in this area to their clients.

The impacts of the current global COVID-19 pandemic are also very real, and are factors influencing supply and demand that will continue to do so for the foreseeable future.

Many buyers and sellers will face both types of markets 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 dealing with, it is important to understand the market conditions you will be working with.

If you have a question about the home buying or selling process, please email information@reco.on.ca.