Buyer’s, Seller’s and Balanced Market. How are they determined?
You’ve heard the terms Buyer’s market, Seller’s market and Balanced market before and you probably have a pretty good idea what they mean, but do you know how they’re calculated and why they’re significant to you? The British Columbia Real Estate Association (BCREA) defines the various market conditions as follows;
“A market in which the sales to active listings ratio is in a range of 14 to 20 per cent. In general, a balanced market results in home prices remaining relatively stable.”
“When there is a higher number of homes to choose from than buyers in comparison. Prices of homes tend to be lower and they remain available for sale longer. Buyers usually have more leverage in negotiating a purchase.”
“A housing market is generally characterized as a “sellers’ market” when there is an excess of demand for homes over current supply as measured by active or new listings. A sellers’ market typically occurs when the ratio of home sales to active listings is above 20 per cent.”
Great! So what is the Sales to Active-Listings Ratio?
Well just like it sounds it is the ratio of homes sold in a given period (generally calculated monthly pertaining to the previous month) to active listings on the market. It measures the balance between supply and demand in the housing market and is calculated by dividing the number of sales by the number of active listings.Knowing what’s going on in the market can help you prepare for the buying or selling experience you’re going to have. does it make sense to throw in a “low-ball” offer in a hot seller’s market? Probably not, but in early January, when the market tends to swing in favour of the buyers it might not be a bad idea.Likewise if you’re selling into a buyer’s market you should expect some more aggressive offers, even if you’re priced right.Markets can swing month to month and year to year. Check out my blog post Timing the Market to see how you can use this knowledge to your benefit by understand the ebb and flow of the annual real estate market in Victoria.