What Does a Sellers Market Really Mean?
Right now is a hot seller’s market. BUT, what does that actually mean.
In the real estate market there are a lot of numbers and measures you can use to tell how the market is doing, but one of the most commonly used metric used is months supply of inventory (often just called inventory).
This number is determined by looking at all the houses that are for sale on the market now, and then dividing that out by the 12 month average of home sales.
So, in essence, it gives you how long it would take for there to be 0 homes left for sale, if no more homes came on the market, and everyone continued to purchase homes at the current rate.
A balanced market is when there are approximately the same number of people buying houses as there are selling houses. When you have a balanced market, neither side has a strong advantage in negotiations either way because, if it doesn’t work out, the seller can probably find another buyer as easily as the buyer can find another house.
Generally, 5-7 months of inventory is considered balanced.
When things get out of balance it lends to one side (the buyer or the seller) having an advantage over the other.
When the housing inventory drops below 5 months you enter a sellers market. That’s the type of market we are in right now. It’s called a sellers market because there are more buyers looking for homes than there are homes for sale. This means buyers are generally completing against each other to buy each sellers home. When that is the case, the buyers don’t have much power because, if they decide to go find another home, generally speaking the seller can find another buyer relatively easily.
The opposite is true for when months supply of inventory is more than 7 months. When that happens it is called a buyers market, because buyers have the edge. They can be picky about the homes they buy because there are more people trying to sell homes than there are people looking to buy them.
But what does that mean for you right now?
Well, if you are considering selling your home, now could be a great time to get it on the market. The months supply of inventory in the valley for last November was 2.49 and that dropped to 2.05 in December, and January has continued the trend of being a sellers market. There isn’t a lot of competition now, but more homes will start coming on the market as we get into Spring and Summer, so it may make sense to list your home for sale before the influx of new competition.
If you are a buyer looking to get into a home right now can be tough. The market is competitive, but it is still possible to get into the home of your dreams. As you work with a professional real estate agent, they can help guide you through the home search and negotiation process.
A good real estate agent will help you put together an offer that is competitive and gives you the best chance at getting the home you want. Even in this strong sellers market we’ve been able to help every single one of our buyers save money and get concessions from the sellers.
Understanding the market is extremely important as you buy and sell your home. Make sure you have an agent that understands the market, and will educate you through the process, and you’ll be in great shape.