What Is A Buyer’s vs Seller’s Market In Real Estate
How do you define a buyer’s market vs. a seller’s market in real estate? The simple answer is that when there’s more supply than demand, it’s a buyer’s market and when there’s more demand than supply, it’s a seller’s market.
Demand in is commonly judged by months of inventory based on closed sales.
Buyer’s Market = 6 or more months of inventory
Seller’s Market = Less than 3 months of inventory
Neutral Market = 3-6 months of inventory
So What Does Months of Inventory Mean?
Months of inventory takes into account the number of homes for sale on the market with recently sold homes and reflects the number of months it would take to sell all homes currently on the market. You can calculate months of inventory by dividing the total number of homes for sale over the number of homes sold in one month.
When months of inventory are low, it’s a fast paced market dominated by buyers and few sellers. When months of inventory are high, there are generally more homes on the market (dominated by sellers) with fewer buyers or sales.
Currently SoCal is a Neutral Market
According to Trendgraphix, there are 3.9 months of inventory across Orange, LA, San Bernardino and Riverside counties, qualifying our current SoCal real estate market as neutral. Inventory is making its way up however, up 2.6% from last month and 11.6% compared to last year.
Riverside County has the most inventory, leading the pack with 5.3 months. Across all counties there was a spike from the beginning of the year, jumping area wide from 2.7 months in December 2014 up to 3.8 in January 2015.
A buyer or seller’s market can even be calculated on a neighborhood level. For example, if you see that there are 50 homes for sale in January, but only 10 actually sold, this means there are 5 months of supply in that market if only 10 homes sold for each month and no new homes came onto the market.
If you need help calculating months of inventory and what kind of market your local area is experiencing, reach out to Jeff Pittman at 714.785.4434.
Thank you for reading. I hope you found this information useful.
Jeff Pittman, Realtor in Ladera Ranch – Orange County, California