What are buyer’s, seller’s and balanced markets?

Hey there, time traveller!
This article was published 17/04/2017 (3185 days ago), so information in it may no longer be current.

When spring temperatures start to climb and snowy yards give way to green growth, buyers and sellers start pushing the real estate market into high gear.

It’s at times like these that we start to hear the terms “seller’s market,” “buyer’s market,” or “balanced market” being tossed around.

It’s easy to get a general sense of what they mean — seller’s markets mean conditions are favourable for sellers to get higher prices for their homes, buyer’s markets allow buyers to come in at lower prices, and balanced markets are, well, balanced.

To be a little more precise, these market labels indicate what’s occurring in terms of housing supply and demand, and they’re actually based on statistical data.

One way of measuring and classifying the market is to look at the sales-to-new listings ratio.

This ratio compares the number of sales in a given market to the number of listings going on the market, revealing the demand for houses in that area and how many qualified buyers are on the hunt.

In a seller’s market, the sales-to-listing ratio is generally at 60 per cent or more, which translates to six or more sales for every 10 new listings. In a balanced market, the ratio is between 40 per cent and 60 per cent, and in a buyer’s market, you’re looking at fewer than four sales for every 10 new listings.

Another effective way of measuring market activity is to look at the rate at which homes are selling or the number of months of inventory.

According to the Canadian Real Estate Association (CREA), the MOI indicates “how long it would take to completely liquidate current inventories at the current rate of sales activity.” According to this measure, a seller’s market occurs when the MOI falls at or below four months, a balanced market falls between four and six months, and a buyer’s market is when the MOI is more than six months.  

You don’t necessarily need to crunch numbers to get a sense of what kind of market you’re in — you can get a preliminary idea by listening to what’s going on in your neighbourhood.
In a seller’s market, a large number of qualified buyers compete for a small number of homes, allowing sellers to drive up their prices. Seller’s markets can push buyers to make bolder offers with shorter closing dates, few or no conditions, and even cash deals. Buyer’s markets, on the other hand, can force sellers to be more competitive with prices and often result in lengthier times on the market.

In Winnipeg’s fairly balanced market, it’s a great time to buy or sell.

This spring, we’re anticipating that prices stay in check while sales activity remains brisk.
But, important as it is to have a general sense of what’s going on in the Winnipeg market, we always recommend consulting with a realtor to understand the market conditions of the specific neighbourhood where you plan to buy and/or sell.

Not only can there can be varying degrees of supply and demand at play but individual factors, such as property developments in the area or plans for improved infrastructure, can affect prices.

The insights offered by agents can ensure that you’re selling for the right price or buying at the best price in your spring market.

Kim Ewchuk is a licensed sales representative  and general manager, Central Canada, for ComFree Commonsense Network broker, member of the Winnipeg Real Estate Board.
Suggest column ideas by email at kim.ewchuk@comfree.com