In the world of real estate, we often hear phrases like “it’s a seller’s market” or “the buyer is in control.” But what does that really mean in today’s housing landscape? As someone actively involved in the market, you’ve probably wondered who truly holds the power.
Every day, we’re bombarded with headlines about mortgage rates, housing prices, and inventory levels. This constant stream of information can make it challenging for both buyers and sellers to understand who is in the driver’s seat. So, what factors do real estate professionals consider when analyzing the market? The key lies in the supply and demand of inventory.
Typically, when housing supply is low and buyer demand is high, we see a seller’s market. Conversely, an oversupply of homes suggests a buyer’s market, where demand has cooled, giving buyers more leverage. One important metric we use to gauge this is the absorption rate, which measures how quickly homes are selling in a particular area. Traditionally, if there is less than a five-month supply of homes, it’s considered a seller’s market; a five to seven-month supply suggests a balanced market, and anything over seven months indicates a buyer’s market.
However, these generalizations don’t always apply uniformly. Market conditions can vary significantly from one neighborhood, city, or state to another. For instance, in my area, a home sitting on the market for more than 45 days often signals that it’s overpriced, regardless of broader market trends.
Nationally, we’ve been leaning towards a seller’s market, characterized by low inventory levels. According to Realtor.com’s economic research analyst Hannah Jones, the market has been more balanced since the peak of the COVID-19 pandemic when demand was extraordinarily high. The last true buyer’s market was in 2012, with housing inventory exceeding seven months, a stark contrast to today’s conditions.
It’s also important to note that the current market is not a simple win for sellers. Many sellers are dealing with the challenge of holding mortgages with interest rates lower than today’s rates. This makes the prospect of selling and buying again daunting, as it would likely mean purchasing at a higher price with a higher interest rate.
In reality, the market feels more like a “limbo market,” where both buyers and sellers are uncertain due to broader economic factors. Despite these challenges, owning real estate remains one of the best ways to build wealth over time.