By Joseph Callaway
When we discuss buyer’s or seller’s markets, we are expressing who has an advantage in negotiations. A buyer’s market means that a buyer has lots of home choices, easy financing, and that the buyer can expect concessions from the seller. A seller’s market means that there are few home choices and buyers must compete to make a deal – think multiple offers and bidding wars.
There is a third market description and that is a balanced market. This is a better situation because sellers often are buyers and buyers often have a home to sell. If you are a first-time home buyer, you may root for a buyer’s market and if you are a last time seller you may wish for a seller’s market but, when you are both buying and selling, a balanced market serves you best.
So, how can you tell? The type of market is determined by the number of homes available. We call this inventory and inventory is either expressed in days or months.
Inventory is the amount of time necessary to sell the homes currently on the market. The calculation is number of active listings in each market divided by the number of homes sold in the last 30 days in that same market.
For example, the number of active listings in the 85254 zip code as of Jan. 10 is 180. The number of listings sold in the last 30 days is 72. So, the inventory for 85254 is 180/72=2.5 months or 75 days.
A rule of thumb is that less than three months inventory is a seller’s market. Three to six months is a balanced market and over six months of inventory is a buyer’s market.
Right now, most areas are on the borderline between a seller’s market and a balanced market, but we are a long way from a buyer’s market.
Good hunting.
Joseph Callaway is with Those Callaways eXp Realty and has been selling houses in The Magic 85254 Zip Code for more than 26 years.
