Ahh, August, the days have been hot, and the usual summer slowdown may make the downwards arrows in the market activity seem a bit more daunting than they really are. Prices are levelling off and days on market are increasing… it looks like we might have the first balanced fall market in over 5 years. What is a balanced market?
Definition of Balanced Market
A balanced market is a term used to describe whether or not supply is meeting demand in the real estate housing market. If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers.
In a balanced market, sellers usually accept reasonable, close-to-list-price offers, while homes generally sit on the market for an average or typical length of time (this can vary from market to market). In a balanced market, housing prices remain stable and, for buyers, there is a usually a sufficient number of homes to compare and choose from.
Why is this term important?
Several factors influence the housing market, including mortgage interest rates, inflation, employment, investment, construction, immigration, government assistance programs, and the health of local and world economies. All of these influence the supply and demand of the market which, in turn, affects prices. In a balanced market, houses are usually sold relatively quickly at reasonable sale prices and list prices tend to stay stable.
A balanced market is one of three market classifications used by experts to describe the balance of supply and demand in the property market. The other two terms—a seller’s market and a buyer’s market—indicate a shift away from a balanced market. Each market is determined based on the sales-to-active listings ratio.
In a balanced market, the sales-to-active listings ratio is between 12% and 20%.
In a seller’s market, there are more buyers looking for homes than there are homes available for sale. In a seller’s market prices for homes tend to rise faster than the long-term average inflation rate—the rate at which most homes appreciate, on average, over time. In a seller’s market, the sales-to-active listings ratio is greater than 20%.
In a buyer’s market, there are more homes for sale, or listings, than there are buyers actively looking to purchase. As a result, price increases slow or stall and, in extreme situations, can even decline. The market is in buyer’s territory when the sales-to-active listings ratio is below 12%.
I’m Sleeping Out in Support of Covenant House
I will be spending a night outside in October as part of Covenant House Annual Sleep-out Corporate Initiative. Thank you to all who have already supported my in my fundraising efforts, your generosity is very much appreciated. Here is a link to my page if you would like more information about Covenant House and their important work in helping homeless youth.