What Is a Seller's and Buyer's Market?

Posted by Jeffery Sweet on Tuesday, August 27th, 2019 at 8:00am

When it comes to Boise, Idaho real estate, everyone wants to buy low and sell high. That’s how you make money when buying a house, after all. The big question is how do you do that? Information, and a little calculation, is key. The success lies in the inventory.

You need to know how much inventory there is, and how that informs the type of market. Keep reading to find out.



What’s the Difference?

In short, the two types of markets are based on the principal of supply and demand. The more homes for sale, the better it is for buyers. They have better negotiating power, and of course, more options to choose from.

The less homes on the market, the better it is for sellers. It usually means they’ll make more money than they would in the opposite position, maximizing their profits.

How Are the Markets Determined?

The absorption rate impacts the state of the real estate market. This is the speed at which homes are sold in a given period. It’s determined by dividing the average number of monthly sales by the number of homes listed – information you can get from your local real estate agent.

When this calculation is reversed, you can find out how quickly (in months) all of the homes will sell. Of course, this is a moving target depending on price point, location, and other important factors, but on average, a balanced market is considered to have between five and seven months of inventory.

That being said, less than five months of inventory indicates a seller's market because there is not enough property to meet the demand. As a result, appreciation of homes rises at a faster pace because the laws of supply and demand still apply.

It’s important to note that when there are a lot of cash buyers, it can skew the market for a short time. That plays a bigger role in a lower-priced property where investors are looking for a deal to buy and rent.

What To Expect in A Seller’s Market like Boise

As a buyer, it’s likely that you'll have to compete with others who want the same house. That means potentially, multiple offers and buyers are willing to pay more, increasing the price. You need to be able to go under contract quickly.

The Boise market currently has less than two months of inventory in some areas. For high-demand neighborhoods, properties are going under contract in a few days or even a few hours. Make sure you have your pre-approval letter ready and can write the offer quickly.

What To Expect in A Buyer’s Market

On the other end of the spectrum, more than seven months of inventory would be considered a buyer's market because there are more properties on the market and more competition for the buyers who want to move quickly.

Prices will likely still be increasing or appreciating but at a slower pace. Although this hasn’t been seen in most U.S. markets, there has been a gradual shift. Some areas are reporting more inventory than usual, but that's not true yet in Boise.

Can It Be a Buyer’s and Seller’s Market at the Same Time?

These buyer and seller situations can exist in the same geographic market. Listing prices may show a buyer’s market in one price range and a seller's market in another. That can happen when new construction pops up, and builders are working for a profit in a particular price range.

Real estate agents look at data regularly to help inform their clients on market conditions. In some areas, it's possible the market under $300K is a seller's market due to low inventory, but above over that price it's a buyer's market due to overbuilding.

It's important to work with an agent who understands the market and keeps an eye on changing conditions. At Sweet Group Realty, we’re proud to be the number one real estate brokerage in Idaho. We’re always watching market trends, and will help you buy or sell at exactly the right time. Contact us today to speak to a real estate agent.

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