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Are We In a Buyers or Seller’s Market? Check Your Town!

Are we in a buyer’s market or a sellers Market? By definition, a buyers market exists when current inventory levels are very high and the buyer has a lot of leverage in determining the price they will pay for real estate. Demand will be low which means homes will take longer to sell in a buyers market because there are so many homes out there flooding the market and competing for the sale.  A seller’s market exists when current inventory of homes on the market is very low, there are a lot of buyers out there competing for the same low inventory. The seller has more leverage in determining the price they will demand for their real estate in a seller’s market. Homes will sell quickly due to the scarcity of the supply of housing inventory.

Absorption Rate for past 12 months; This table shows past data for single family housing inventory of homes for sale in Massachusetts, or the monthly rate at which supply has been absorbed by the demand for homes in the market place for the past 12 months and what we can reasonably expect the market to absorb in the future. The fewer homes that are available, the closer we are to a Seller’s Market where the market favors the seller’s goals to net more for the sale of their home due to more buyers competing for less inventory. More buyers competing for less inventory of homes is the factor which drives up demand and when demand increases, this in turn drives up selling prices and that is good for the seller.

The supply and demand numbers for past data of real estate in Massachusetts areas I have chosen are calculated as follows: For each town, I have calculated: the number of listings sold in one year+ the number of listings currently under agreement divided by 12 months= Average sold transactions per month also called the run rate.

To determine the Number of Months Supply Inventory we have on hand, or how much supply the market is absorbing,  you simply divide the number of Active Listings by the Average Listings Sold per Month (the run rate) and you will then have the Number of months of housing Inventory supply on hand right now.

The table below shows some towns have many months worth of inventory sitting on the market, most likely because they are over-priced.  Other towns seem to be doing very well.  In a competitive market it helps to keep in mind competitive pricing sells a house. In addition it is critical to utilize proper staging techniques, to de-clutter and perhaps to add some creativity into the price negotiations for a buyer who is solid, has lined up financing and is a ready, willing and able buyer.

Table Copyright 2010 Cheryl Flynn

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