Buyers Market and Sellers Market Explained

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.

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1 Reply on “Buyers Market and Sellers Market Explained

  1. The listing price of a home simply should not be used as the basis for making an offer on a property. Often the listing agents in Ventura County short sale transactions are pricing properties far below the true value simply to create a virtual auction and attract multiple offers. The idea is to prove to the bank what serious buyers are willing to offer. Since you will be bidding against other buyers you will have to have a good idea where your offer should be if you are really serious about getting any particular home in today’s market. You don’t want to pay over fair market value but by the same token if you should bid less than market value chances are that you are going to be out bid by another buyer.