There’s no doubt about it: It’s a seller’s market.
With ever-increasing home prices and never-ending buyer demand, home sellers are clearly in the driver’s seat in today’s market.
But, there are a number of factors that will determine the state of the market. Here are some of the key differences between a buyer’s and seller’s market.
If current inventory levels exceed six months or more, then by definition the market leans in the buyer’s favor. If the months of inventory are less than three months, as is the case today, then it can safely be concluded that it’s a seller’s market.
Months of inventory is a term to explain how long it takes for a home to come off market. If there are three months of inventory within the real estate market, for example, then it would take three months for all the inventory to dry up based on current trends.
To calculate months of inventory, simply divide the total number of homes on the market over the number of home sold in the current month or current trend.
Today’s fast-paced market, which is dominated by robust demand, shrinks months of inventory as homes quickly sell.
In a neutral market, kind of like the Goldilocks of the housing market when it’s not too hot or cool, homebuyers and home sellers can expect about three to six months of inventory.
Depending on where you currently live or hope to buy, the months of inventory will vary. A buyer’s and seller’s market can be pinpointed at the neighborhood level as well. This gives the market participants a good idea on how long a home will last in a specific market or neighborhood. This information is invaluable because it looks at specific trends at a micro level to determine which way the market leans.