Whether you are thinking about buying your dream home or selling your current property, it is very likely you will be impacted by the present state of the real estate market.
The condition of the market can influence both buyers and sellers, so it’s important to understand the difference between the market types and how you might be affected.
There are two primary terms used to describe the real estate market: a seller’s market and a buyer’s market.
Each term can be used to describe whom the market is serving.
A seller’s market tends to serve the seller because the demand for houses is high, driving prices up and encouraging competition. There is a shortage of homes for sale and increased demand. This can result in homes sold for over asking price with multiple buyers competing for the same property.
A buyer’s market better serves a buyer because there are plenty of homes to buy, and no rush to make a decision. Inventory for houses is plentiful, there is more variety, price reductions are more common, and in general buyers have more leverage.
A third, less familiar descriptor refers to a state of equilibrium in the market, where the number of houses and the number of buyers interested in them is balanced. In this scenario, the market offers more stability. However, this is an infrequent occurrence. More often than not, the real estate market tends to lean in favour of either buyers or sellers.
Markets can be influenced by region, by city, and even by neighbourhood. One suburb may experience a seller’s market, while another may favour a buyer.
Who may be ultimately served by the state of the market is up for debate. Since many homeowners must first sell an existing home before purchasing a new one, they are served on one side but at a disadvantage on the other.
Thus, the description of which market type you may be experiencing as a buyer or seller can be helpful to set expectations before entering into a real estate transaction.
For example, if you are a seller in a seller’s market, you can likely anticipate a quick sale and perhaps some competition to help elevate your sale price. In the same market, a buyer can expect to have to make quick decisions and pay close to or over asking price.
Housing types will also play a role. You may find a specific style of home less popular in a particular market.
For example, last year Oakville saw a large increase in the number of detached homes sold, but far less interest in condo apartments. If you happen to be in search of a condominium apartment in Oakville, despite the fact that it is currently a seller’s market, your experience may be more like what’s found in a balanced market.
Reference: Real Estate Council of Ontario (RECO) (November 2020). Ask Joe.
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