We are in a Sellers Market
Difference Between Buyer and Seller Markets – We are in a Sellers Market
by Frederic Din, REALTOR(r) and Your Imperial Valley Housing Specialist
Whether or not you’re in the real estate market you’ve undoubtably heard of either phrase, “its a buyers market” or “its a sellers market”, and perhaps you have heard them from your real estate agent but did they take the time to explain to what these phrases mean?
As your local Imperial Valley real estate expert and housing guide, I thought you would like to know the facts regarding each of these market types, how to identify them, and how they can benefit you whether you’re a buyer or seller.
Recently I was talking with a real estate agent who is advising his clients that we are in a “buyers market” and I had to stop and ask what his definition of a buyers market is. His answer, albeit common place among many agents, was not correct. He kept eluding to how low interest rates are and how there are great deals out there and buyers should be buying. I asked him to define a buyers or sellers market, and he did not have an answer for me. I agreed with him that mortgage interest rates are low and prices are low relative to who they were just a few years ago, however I told him those facts do not make a buyers market. I briefly went over the facts regarding our current market and he said, “oh yea, you’re right based on the sales and inventory…blah blah blah…” basically he did not know what he was talking about. Do you want this type of an agent helping you, whether you’re a buyer or seller? I doubt it…let me know how I can help you.
The standard definition of each market is represented by the graphic which includes the amount of inventory in the marketplace, typically described by the amount of inventory available.
In a Sellers Market, there is a lower amount of inventory available usually described as 0 to 3 months of housing inventory. To determine how many months of inventory a market place has, we must take all active properties and divide them by an average number of monthly sales.
For example, there are 44 residential properties available for sale in the El Centro zip code 92243, and there is an average of 26 sales per month, which equals 1.69 months worth of inventory as of May 31, 2012. Meaning if no other properties came onto the market, it would take less than 2 months to clear out all of the remaining inventory.
Based on these figures for El Centro CA 92243 the market type is?!?!? a Sellers Market!
I know what you’re saying to yourself, “but Frederic prices are low and interest rates are low, we’re getting deals on homes so it must be a buyers market, its a great time to be a buyer…”. I agree, this market makes it a great time to buy a home because interest rates are low and prices are as much as 50% less than they were just a five or six years ago.
Lets take a look at the market for various cities throughout the Imperial Valley so you can determine if we are in a Buyers Market or a Sellers Market for residential properties.
City # Mo Sales # Properties # Mo Inventory Absorption %
El Centro 92243 26 44 1.69 59%
Brawley 92227 13 33 2.53 40%
Calexico 92231 18 18 1.00 100%
Imperial 92251 17 30 1.76 57%
Heber 92249* 23 02 0.00 1150%
* limited sales data available
How can this information help you as a buyer? First, as a home buyer you must have an agent who understands the market, the dynamics of making offers that make sense while make sure you have an opportunity to be in the running for a home which has received multiple offers, which is taking place more and more simply due to the fact that there are less properties that people want on the market.
Less properties and more buyers equals multiple offers and at times offers exceeding the market value of the property by as much as 5 to 10%!
The definition of each of the markets is found below:
Buyers Market: A buyer’s market is one in which there are more sellers and homes for sale than buyers. Since supply is greater than demand homes will typically be priced lower making them attractive to buyers.
Sellers Market: A seller’s market is one in which there are lots of buyers and relatively fewer homes for sale, which leads to multiple offers on properties that drive up prices.
Another term you should know is the market absorption rate, which is calculated by looking at how many homes sold in a certain month and dividing that number by the total number of homes for sale at the end of the month. An absorption rate of 20% or lower is usually an indicator of a buyer’s market since homes are selling relatively slowly and the number of months of supply is high, while an absorption rate of 60% or higher is usually an indicator of a seller’s market since homes are selling relatively quickly and the number of months of supply is low.
To learn more about buying your first home, check out my How To video called
http://firsthomebuyervideo.com to learn more. Check out areas where you want to live by using our Neighborhood Tour Videos <— by clicking the Neighborhood Tour link.
How can I help you? Feel free to visit and post comments regarding the website and stay tuned for upcoming changes to the look and feel of ImperialValleyREO.com
Are you in the market to buy a home? Get personalized information for any area in the Imperial Valley, including El Centro, Brawley, Calexico, Imperial, Heber and surrounding cities by going to ForSaleByFred.com, ImperialValleyREO.com, or First Time Home Buyer Video
Imperial County and Imperial Valley homeowners who are considering selling their home are encouraged to contact Frederic Din, REALTOR(R) for additional information about getting the most current market values for your home or area. Member of the Imperial County Association of REALTORS (ICAOR).
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