You may have heard people use the expression “buyers market” or “sellers market” when speaking about the conditions of the real estate market. So what do these expressions mean, and how do we really get a good understanding of whether or not we are currently in a buyers market or sellers market?
Real Estate is a hyperlocal business, you can look at the data from a macro standpoint looking at the economy as a whole or micro standpoint and look at housing in a School District and really fine tune the information you are getting. For this discussion, we will reference all properties sold within the town of Eastchester. Please note that the town of Eastchester also encompasses the Villages of Tuckahoe and Bronxville.
A sellers market or buyers market really is just a reflection of the supply and demand within the housing market in an given area. A high demand with a low amount of inventory for sale would constitute a sellers market, while a low demand with a high amount of inventory for sale would constitute a buyers market. Our current market conditions reflect a sellers market, aside from the bidding wars on local properties and price increases how does one actually look at data to see that this is true?
The calculation is in fact pretty simple. Realtors take the average rate of sale by looking at how many homes have sold in the area within the last 12 months, and dividing that by 12 to come to an average number of homes selling per month. We then look at the number of homes per sale on the market, and estimate how long it will take for the current supply to sell based on our average sale rate.
For example, lets say we had 120 homes sell within the last year, if we divided that by 12 we would have an average of 10 homes sold per month. If we currently had 30 homes on the market within that same area, we can divide the amount of homes by the average sale rate and come to 3. That in essence means that we have about 3 months supply on the market.
How we do know what a good amount of supply is?
Well, the figure that realtors use to judge the amount of inventory is the 6 month rule. 6 months of inventory is considered to be a completely balanced market, neither in favor of buyers or sellers, while anything below 6 months would be considered a sellers market, and the less there is, the faster the homes will sell and the higher the prices will go. Anything about 6 months of inventory would be considered a buyers market, the higher the supply, the more we will see price decreases and slower movement in housing sales.
As of December 2016, Eastchester has 4.1 months supply of inventory on the market, so as you can see, we still reside in a sellers market, so if you are thinking about listing your property for sale, the conditions are adequate, if you are thinking about purchasing, you will seemingly face competition in the current market.