Buyer or Seller Market – How Do You Know & What does it mean to me?
It’s an age old question – How’s the real estate market? Is it a buyer’s market or a seller’s market?
First a quick definition:
According to the National Association of Realtors a housing market in balance is roughly 6 months of supply – once you have less than 6 months of supply, the pendulum swings toward a sellers market & anything over 6 months moves towards a buyers market. The more you slide from the 6 month mark, the more extreme the market either way.
Supply: Number of homes on the market
Demand: How many buyers are purchasing each month
Here is the formula:
# of homes for sale divided by # of homes selling each month yields the # of months of supply
The formula works the same either for a city or subdivision etc – if you are looking for market conditions as compared to your home it would look like this:
In order to understand YOUR market, then you need to look at how many homes in your price range, in your area, are for sale and then compare that with how many of those homes are selling each month. In real estate terms this is called ‘absorption rate’
You own a home in Cary in the $300,000 – $400,000 range
Does it really matter to you what homes in Cary in the 800k range are doing? No, not directly – at this point as a home seller you would be ‘competing’ against other homes in the 300-400k range, not 800k homes
Assume there are 200 detached (not townhomes/condos) single family homes for sale in Cary in the 300-400 range
What does that tell us? Nothing yet.
Assume in the last few months an average of 20 buyers have closed on a home in Cary in the 300k-400k range each month
Now we are getting somewhere – if there are 200 available homes with an average of 20 buyers per month, then we know there is roughly 10 months of housing supply in this range.
So in this example, in Cary, in the 300-400k price range it would be a buyers market. (because it’s more than the 6 month balance point)
This is a basic example of understanding your market – it boils down to how many homes like yours in your area are for sale, compared to how many available buyers are available. This is only one of many factors you would consider in determining a marketing strategy if you were selling your home.
This example does spotlight the fact that if you needed to sell your home and were facing 10 months of supply and competing with 200 other homes for 20 buyers each month the importance of understanding your market conditions and pricing your home strategically.
Curious about your Real Estate Market? Need to sell your home and need a strategy not just a sign in the yard? I’m here to help!