What Makes A Buyer’s Market or a Seller’s Market
May 10th, 2009 Categories: Real Estate News
What Makes A Buyer’s Market or a Seller’s Market?
A buyers market is when there is more than 7 months supply of homes in a given market, a seller’s is when there is less than 6 months supply of homes in a given market and 6 months supply is called a neutral market.
So how do you determine how many months supply of homes on the market?
Also what is a market?
A market is any given set of parameters. Area, Price Range…
So once you pick an area, a price rang…
Then you determine the # Active Listings
Then add the Sale Pending and the Sold listings for the last 60 days
Divide that number by 3, then divide the active listings by it.
So let’s go through a run.
I will do a report on Salt Lake County, Single Family Homes.
Using a price range from 0-$250,000
We have
2,740 Active Listings
848 Listings that have a sale pending
702 listings sold in the last 60 days
We add the 848 (pending) and 702 (sold 60 days back) and get 1,550.
We divide the 1,550 by 3 = 516.67
Then we divide 2,740 (active listings) by 516.67 = 5.30 Months Supply of homes.
Based on that we have a slight seller’s market. Not to be confused with the run away seller’s market of ’04-07. What it means that these seller’s are not taken a beating and giving away the farm to sell.
Because the 100% loan has all but gone away buyers have to come up with at least a 3.5% down payment and are asking the seller to pay the buyer’s closing cost. So sellers are getting about 97-98% of the value.
The $250,000-350,000 range is a neutral market with a 6.53 Month supply of homes
Active 1,485
Pending 358
Sold (60 days back) 324
The $350,000 and above market is definitely a buyer’s market with 10.56 months supply of homes
Active 1,978
Pending 293
Sold (60 days back) 269
Now bear in mind these are for Salt Lake County as a whole. You can break it even further and get different results.
Some cities or zip codes in $250-350,000 price range may very well be a buyer’s market and not a neutral market.
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Thanks for the simple explanation. Quick question, whay do you use 3 to divide the pendings and solds?
Hi Leo,
The reason for the three is is this.
In order to have a more accurate picture of the market you have to have multiple months of data.
For example if you took the inventory and divided it by January’s closings and then later took May’s closings and did the same thing you would have numbers all over the place.
So the idea is to take 2 (months sold) (Current pending) 1
We count the sold as 2 and the pending as 1
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