Investors of all stripes can tell you that success is a matter of timing. Buy low then sell for more. Simple enough, right? Almost any commodity that has an appraised value and bought and sold for a profit can follow that model. Does the same work for real estate? Can the market be timed? Those in the real estate industry can tell you there really is no specific time of the year or season when it’s time to buy and when it’s time to sell. It’s determined by local market conditions, and there are three of them.
A Buyer’s Market
Real estate markets are characterized by the amount of available inventory compared to the number of buyers. A perfectly balanced inventory means it will take approximately six months to sell all available homes. In a buyer’s market, it means it is taking longer than six months to sell everything. Sellers are more inclined to accept offers below the list price. Buyers can also anticipate seller concessions beyond price such as paying for closing costs or upgrades.
A Seller’s Market
A seller’s market means the pendulum has swung in the opposite direction and it’s taking less than six months to sell available inventory. In ultra-hot markets, there can be a “30 day supply” of homes where it would take only one month to sell all the homes listed for sale. Sellers will rarely accept any offer less than list price and are often on the receiving end of a bidding war. On the other hand, when a property owner sells and turns around and buys in the very same market, they suddenly find themselves on the wrong side of the equation.
A Neutral Market
If it’s estimated it would take six months to sell all existing inventory in particular market, it’s considered balanced, or neutral. There is no favored side in a transaction, buyers or sellers. Markets may be in a transition and pass through the “neutral” phase, but the real estate industry has long established this six month mark as an equal footing between sellers and buyers.
