What are the Different Types of Real Estate Markets?

There are different types of real estate markets and it's helpful to know the differences and what effect they have on buyers and sellers. Understanding your local market conditions will go a long way when planning your strategy. 

The measurement we use to determine what type of real estate market we are currently in is the "Absorption Rate" metric. This is also known as "Months of Inventory." It's actually based on a rolling 12 months of inventory and current buyer activity. Those two data points tell us what the current month's supply of inventory is. From there, we just check the scale to see what type of real estate market we are in. 

Seller's Markets

A seller's market occurs when there is more demand for housing (from buyers) than there is supply of homes for sale (from sellers.)

We are in a seller's market when housing inventory is at less than 5 months. This is a market that favors sellers. 

There is less competition among sellers with fewer homes on the market. Homes tend to sell much quicker during a seller's market due to buyers being scared of not finding a home to purchase. Add to that, more buyers looking for homes and you can end up with multiple offers on your home and likely get an above-asking-price offer

Neutral or Balanced Markets

A neutral market has about 5 to 6 months worth of homes on the market. This type of market favors neither the buyer or the seller. It's a level playing field and one in which a good real estate agent can be your best asset. Sellers will typically get a reasonable price for their home and buyers will usually not have to pay over the asking price. 

Buyer's Markets

Conversely, a buyer's market happens when there are more houses for sale than there are buyers looking to purchase. The type of market favors the buyer. 

Sellers are more willing to accept terms of an offer that are favorable to a buyer. We often see things like a lower purchase price, paying some of the buyer's closing costs, or making more in-depth repairs during a buyer's market because there are so many homes for sale. 

The time it takes to sell a home during a buyer's market is generally much longer. Again, buyers can take their time and be picky because there are so many homes to choose from. A buyer's market has 6+ months worth of inventory.

Circumstances make it necessary for people to sell and buy homes every day. Having an experienced, knowledgeable, and committed team by your side is the best strategy regardless of the real estate market's type. The Evelo Team is ready to guide you as you navigate today's market. Call, text or email us and let's talk!