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“Market Conditions” – Explained

market-conditionWe constantly hear news reports referring to the term “market conditions”, but what exactly does that mean? At the most basic level, market conditions are the supply and demand real estate. If there is little inventory and lots of Buyers prices tend to increase. Alternatively, if there is plenty of inventory but few Buyers, prices tend to decrease. A balanced market occurs when there is a balance between the inventory and the number of interested Buyers. There are a number of other factors that can influence market conditions, such as interest rates, the local economy, the global economy, and foreign investment trends; but market conditions, at their core, come down to supply and demand.

Generally speaking, there are 3 types of real estate markets to consider:

A Seller’s Market
In a Seller’s Market the Seller rules. A Seller’s Market is typically characterized by multiple offers and very quick sales with low Days On Market. This activity helps to fuel this type of market. Buyers need to make offers that are as attractive to the Seller as possible. In other words, Buyers need to provide terms and conditions that are the most favorable to the Seller. This will ensure that their offer stands out among all the others.

A Buyer’s Market
In a Buyer’s Market, Buyers have the upper hand. They can afford to be choosy, as they have an opportunity to look at lots of houses and take their time. When they do find that perfect home, they can write the terms and conditions that best suit their own goals, within reason of course. In this market, you will typically see the “subject to sale” clause. This clause is, where a Buyer can find a new home then see if the Seller will entertain a conditional offer that allows the Buyer the time to sell their own home. In a Buyer’s market, Sellers have to be prepared to compromise in order to get their home sold.

A Balanced Market
A Balanced Market is a healthy market. Homes are on the market for a reasonable amount of time, offering Buyers an adequate opportunity to select a home that fits their needs and goals. The terms and conditions of an offer are equally weighted within the transaction. Overall, it is a more relaxed, stable market.

This is 2nd of 5 Blog posts in Step 6 of a 10 Part series. Go to the next blog post in this series: Should I Buy or Sell First?

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