Have you ever wondered if people are making these words up? Are they just buzzwords? “Buyers Market” and “Sellers Market” are often used subjectively. However, they are objective terms which when used appropriately can help you understand people’s behavior within a market.
Here are a few terms explained:
- Absorption rate: the average number of homes people have bought per month.
- Supply: the number of homes that are on the market divided by the absorption rate.
- Sellers Market: when there is less than a six month supply of homes on the market. Sellers tend to have the advantage in pricing and negotiations.
- Buyers Market: when there is greater than a six month supply. Buyers have more choices and thus more negotiating power.
Is one kind of market better than the other? The answer depends on whether you are buying or selling. When it is time to sell your home, the numbers to know are the absorption rate and supply for your neighborhood and price range. This level of analysis will help you to place yourself ahead of your competition, in any type of market.