If you circle around the real estate industry long enough you will start to hear terms thrown around such as a buyer’s or seller’s market, but without the proper understanding there is no way to know if what you are hearing is accurate and up to date. Knowing this is crucial for areas such as pricing strategy and even contract negotiations. If you know the conditions of they market, and understand different cycles you will be better prepared to properly price your home or make a stronger offer.
Please note these descriptions are for residential markets, and not commercial or rental. They carry their own types of metrics and indicators. For more detail on the metrics themselves, you can go here for a list!
Hot Seller’s Market
Characteristics: Scarcity + Urgency
This is going to be the market where the “good” homes are gone by Monday, if not all the homes. Open houses, if they have them, are packed, there is an urgency for buyer’s to write an offer and many times there are bidding wars and multiple offers submitted all at once.
Out the door are long and in-depth inspection timelines, buyer concessions or credits, and long repair lists. Flaws will be ignored to get the house. Sellers will be confident in their pricing, and in the hottest of markets appraisals may even lag because the closed comps they use to compare haven’t caught up.
How to identify:
| Months of Supply (MOS) | Less than or equal to 2.5 |
| Sale-to-List Ratio | greater than or equal to 100% |
| Pending-to-New Listings | greater than or equal to 0.9 |
| Median Days in Market | Less than or equal to 20 |
| Price Reductions | Less than 15% |
Seller- Leaning Market
Characteristics: Seller advantage but only for the well-positioned homes
The top line is still going to see multiple offer scenarios while the mid-grade homes will need a bit more prep work, professional cleaning, decluttering, and sharper positioning within the market itself. Negotiations will be calm, there will be modest seller to buyer credits, and while the seller can still steer the timing as far as how long they are willing to be in an inspection period, buyer’s will not chase an obviously stretched price.
How to identify:
| Months of Supply (MOS) | 2.6 – 3.9 |
| Sale-to-List Ratio | 99 – 100% |
| Pending-to-New Listings | 0.8 – 0.89 |
| Median Days in Market | 21 – 30 |
| Price Reductions | 15 – 25% |
Balanced Markets
Characteristics: It’s a fair fight
Both sides must justify their asks where presentation, pricing accuracy, and terms matter as much as price. There will be normal inspection and appraisal timelines, back and forth negotiations, and possible requests for reasonable repairs. Homes that are ready to go and well prepared will sell, others will sit until they are reassessed.
How to identify:
| Months of Supply (MOS) | 4 – 5.5 |
| Sale-to-List Ratio | 98 – 99% |
| Pending-to-New Listings | 0.7 – 0.79 |
| Median Days in Market | 31 – 40 |
| Price Reductions | 25 – 30% |
Buyer-Leaning Market
Characteristics: Choice + Leverage for buyers
In this instance there will be more showings than offers and buyers may even want to see a listing a few times over a period of time. Buyers will take their time and negotiate for repairs, credits, and rate buydowns will be frequent. There will be adjusted pricing, relisting old properties with new photos, mid listing improvements that were avoided at the beginning, and local builders will be seen advertising incentives.
How to identify:
| Months of Supply (MOS) | 5.6 – 7 |
| Sale-to-List Ratio | 97 – 98% |
| Pending-to-New Listings | 0.6 – 0.69 |
| Median Days in Market | 41 – 55 |
| Price Reductions | 30 – 40% |
Cold Buyer’s Market
Characteristics: Abundance of options where value will be the dominant factor
Here, listings will linger on the market while only the best-priced and best-conditioned homes will sell. Sellers will need to lead with value, or fix everything. There will be concessions and credits, seller sponsored rate buydowns, and extensive repair requests. Creative financing also will make a play where investors can come in with whatever scenarios they want and cherry-pick properties, and owner-occupants will need to either price for value or be patient and wait for the next cycle.
How to identify:
| Months of Supply (MOS) | Greater than 7 |
| Sale-to-List Ratio | Less than 97% |
| Pending-to-New Listings | Less than 0.6 |
| Median Days in Market | Greater than 55 |
| Price Reductions | Greater than 40% |