What’s The Difference Between a Buyers’ And a Sellers’ Market?

If you are in the process of making a real estate move I am sure you will have heard the discussion of whether it is a buyers’ or a sellers’ market and you may have wondered what’s the difference and does it matter.

What's the difference between a buyers' nand asellers' market

Yes it does matter as you certainly want to be on the right side of the market. So what’s the difference between the two? The loose definition of the different markets is determined by the time it will take to sell the current inventory of homes: up to five months of inventory signifies a sellers’ market; five to seven months a balanced market, favoring neither buyers nor sellers; over seven months a buyers’ market.

Over the past few years you will have noticed all the headlines talking about listings coming on the market and being hit by multiple offers, sometimes in the several dozen. I was once in contention for a home with 39 offers. We ended up the number two buyer with the home selling for $200,000 over asking. It was not a good time to be a buyer. At the same time inventory was fairly low which is what helped spike the number of offers and the rise in prices. It was a great time to be a seller. So you may wonder why more prospective sellers didn’t take advantage of the market. One of the reasons was because they were in a catch 22 position, as they too would need to compete in a tight buyers’ market.

A good part of the Los Angeles real estate market has now moved into a more balanced market and one favorable to buyers. Inventory has risen and prices are starting to stabilize. In the luxury market they are slowly starting to come back down. Buyers can now afford to bide their time more and not feel like they have to jump through hoops to make a successful offer. However some sellers are going to need to adjust to this market change and realize that they an no longer test it. They are going to have to price their homes competitively if they truly want to sell.

Even though buyers have the advantage right now it doesn’t mean that the number of sales are going to rise. The last market helped drive housing affordability in Los Angeles way down so it will be interesting to see what happens to prices over the next couple of years.


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