What’s the difference between a seller’s market and a buyer’s market?

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A number of variables impact the housing market including, inflation, employment/unemployment, investment, construction rate, immigration, national debt levels mortgage interest rates, government assistance programs, and the strength of local and international economies. All of these influence the supply and demand of the market which, in turn, impacts prices.

There are three classifications experts use to describe the balance of supply and demand in the housing market:

Seller’s market

A seller’s market is when there are more people looking to buy then there are homes available for sale. This causes a rise in price above the long-term average rate of inflation. In the Red Deer and Central Ab market, this is indicated by a sales-to-active-listings ratio of 25% or higher (4 or less months-of-inventory for sale).

Buyer’s market

In contrast, a buyer’s market is when there are many more homes for sale than there are buyers. As a result, prices increase slower than the long-term average rate of inflation. In extreme circumstances, this can cause prices to decline. In the Red Deer and Central Ab market, this is indicated by a sales-to-active-listings ratio below 20%(5 or more months-of-inventory for sale).

Balanced market

A balanced market occurs when supply and demand are about the same, with home prices rising in line with the long-term average rate of inflation. In the Red Deer and Central Ab market, this is indicated by a sales-to-active-listings ratio between 20% and 25% (between 4-5 months-of-inventory for sale).

Summary

Over a sustained period of time:

  • a seller’s market is represented by a ratio of 25% or higher
  • a buyer’s market is represented by a ratio of 20% or lower
  • a balanced market rests between 20-25%

To discuss the local Red Deer and Central Alberta real estate market when planning to buy or sell property call your local technical market analyst and Realtor® Blake King with Century 21 Advantage (403) 350-7672 or email hello@blakeking.ca

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About the Author

Blake King
Having lived in Red Deer my entire life and having experience in many avenues of real estate I offer enormous value to my clients.