What is a Seller's or Buyer's Market?

01/06/2022

We hear these terms bandied about a lot but what do they actually mean? Are there actual metrics for these terms or are they arbitrary? We actually do have metrics for how hot or cold the market is and that is based on the months of inventory available. This is how long it takes for all the homes currently for sale in the market to go under contract.

Hot Market= Seller's Market

This is an extremely competitive market and is advantageous to the seller. We use the metric of 0-2 months of inventory for a hot sellers market. Sometimes, homes will sell as soon as they are listed or even before homes are listed. Typically, during a hot market, multiple offers will be made on each home and more often than not, homes will sell for more than the asking price. It can be easy to get caught up in the bid for a home, but if you are prepared (pre-approved, solid in price range, realistic about your needs), it is easier to remain focused on your housing needs and price range.

Normal Market = Balanced

A normal market is considered a balanced market when we have 2-4 months of inventory available. In this market there is a fairly large number of homes available and an average number of buyers. This market does not necessarily favor the buyer or the seller. A seller may not have as many offers on their home and it may take a bit of time for the home to sell. There is often more negotiation in this market than in a hot one and the buyer usually has the opportunity to do an inspection. The contract will typically have the standard contingencies like inspection, finance and title that we often waive in a Seller's market. As a buyer, you may be able to make offers at lower than the asking price and negotiate a price at least somewhat less than what the sellers are asking.

Cold/Cool Market = Buyer's Market

In a cool market typically has 4+ months worth of inventory. Houses may be listed for months at a time and the prices of houses listed may drop considerably. This market is advantageous to the buyer. As a buyer, you have the time to make an offer that works to your best interest. It is not uncommon to low-ball and to find that sellers are accommodating to meet your needs. Keep in mind that even though this market is a great time for buyers, you do not want to lose your dream home by being unrealistic. Your goal is to get your dream home at the best possible price.

It's interesting to note that the Seattle Metro area has not had a balanced or normal market in over 20 years. It certainly doesn't seem like one is on the horizon either.