What Is the Difference Between a Buyer’s Market, Balanced Market, and Seller’s Market?

You may have heard people say “the real estate market is crazy right now," but what does that actually mean? Well, what they usually mean is that the balance of power in the market has shifted.

Real estate markets move through three main phases, and each one changes how homes are priced, how quickly they sell, and who has the advantage during negotiations. Knowing which market you are in protects you from making expensive assumptions and can influence your choice of when to actually buy or sell.

Markets are measured based on their "months of supply". This simply measures how long it would take for inventory to sell out at the current sales pace without new inventory being added.

A balanced market is the most stable environment. In this market the levels are about a 4 to 6 month supply. Supply and demand are fairly even, homes sell in a reasonable timeframe, and pricing tends to stay close to market value. Neither side holds a clear advantage, which usually leads to smoother transactions and fewer extreme negotiations.

A buyer’s market happens when there are more homes for sale than there are buyers, usually more than 6 months of supply. Since inventory levels are higher, homes sit longer and price reductions are common. We are right now (as of this article's post date) in a Buyer's Market. Buyers right now generally have more leverage and can negotiate more strongly on price, repairs, and closing terms. Sellers in this type of market need to be realistic with pricing and flexible during negotiations. They may even need to prepare their home for sale to attract attention. If not, buyers will pivot to another home fairly easily.

A seller’s market occurs when there are more buyers than available homes, usually under a 4 month supply. Since inventory is low, homes sell more quickly and multiple offers are common, some including escalation clauses. Sellers typically have stronger negotiating power, and buyers may need to act quickly, make cleaner offers, and limit contingencies to stay competitive. In these markets, sellers have more power and buyers can lose a home quickly if they make negotiation mistakes.

The type of market you’re in affects how you price a home, how aggressive an offer should be, what concessions are realistic, and how quickly you need to move. Using the wrong strategy for the current market often leads to frustration, missed opportunities, or paying more than necessary. As you can probably imagine, having a Realtor to help guide you through these markets is a major advantage.

Bottom Line
A buyer’s market favors buyers, a seller’s market favors sellers, and a balanced market keeps everyone on more equal footing. Knowing which one you’re in helps you make smarter pricing and negotiation decisions.

If you want to understand what type of market we’re in right now and how it should guide your next move, give me a call and let's talk. or you can visit NextHomeEric.com. I’ll help you align your strategy with the current market conditions.