You hear these terms often. Is it a buyer’s market or a seller’s market? My readers will likely understand my aversion to market speculation (which will probably come more apparent in the weeks to come), but reading the cold hard facts and explaining the present market is definitely something that you should expect your REALTOR® to do. The general idea is basic. A buyer’s market is when there are more sellers than there are buyers, lessening demand and usually reducing prices. A seller’s market is when there are more buyers than sellers, increasing demand and prices.
While that is obviously oversimplified even in theory, it does lead to the practical problem of gauging the market. How do we know that there are more buyers than sellers? It isn’t like there is a daily poll out there asking random households if they are looking to buy – and even if there was, what does “looking to buy” even mean? When are you looking to buy? Do you have the funds to buy? How serious are you? So when a REALTOR® says that we are are in a buyers market or a sellers market, where are they getting that from?
Generally speaking, at at least in our area, we look to the sales-to-listing ratio. That is, in one month, how many properties sold compared to how many properties were on the market. We then compare that to some imaginary breakpoints that someone has decided at what ratio is a “buyers market”, a “balanced market”, or a “sellers market.” Different organizations will use the same numbers, but different breakpoints.
Here are two pertinent examples: the Fraser Valley Real Estate Board offers suggested ratio breaks of 0-18% as a “buyers market”. This means that for every 100 homes on the market, between 0 and 18 sold. A balanced market is between 18-22% and a sellers market is over 22%. Generally speaking, if you hear that it is a “hot” market, we are looking at ratios in the mid to high 20s. A “soft market” will probably be in the single digits. The second example I would like to point out is through the Canada Mortgage and Housing Corporation. Although similar, they suggest a buyers market is between 0-15%, a balanced market is 15-20% and a seller’s market is over 20%. The general idea is there though.
Diving deeper still, we live in a big country with a lot of different product. I often say there is no such thing as a “Canadian housing market”. I sometimes joke that there is the Vancouver market and then there is the “rest of Canada” market. In truth, there are many Canadian housing markets. Further to that, one product – say detached homes – may be hot in the same community that townhome numbers are in the dumps. Why is this important? What if someone led you to believe that because we are in a “hot” market, and we were (overall), you decided to try selling your townhome. But townhomes aren’t selling. The detached homes and condos were pulling up the numbers. Don’t you think that might weigh in your decision to sell? Or buy?
Part of the reason I am writing about buyers and sellers markets is to showcase our current situation in the Fraser Valley. Over the last two months we have seen two headlines when it comes to our present market: huge variations between locales and huge variations between product type.
For the month of June, the entire Fraser Valley sales-to-listing ratio was 16% – a slight buyer’s market, right? But let’s break that down a bit. For detached homes, the ratio was 22% – jumping the balanced right into a slight seller’s market. Townhouses in the area were also at 22%. Which means that condos must be pulling down the number – and they are, a slow 12%.
But what happens when we look at individual communities? The Fraser Valley Real Estate Board covers Abbotsford, Mission, Langley, Surrey, White Rock, and North Delta. Often, these numbers look pretty similar. But what about June? Abbotsford’s overall sales to listing ratio was at 15%, but White Rock’s was 23%! What’s in 50km? So it might be misleading to tell someone in White Rock that their board is experiencing a buyer’s market, no? The numbers don’t lie, but oversimplified data won’t do anyone any good.
My home of Langley can show the other extreme variation going on right now. Want to sell your detached home in Langley? Probably won’t take too long if it’s priced right – ratio was 24% in June! Think that’s good? 3 in every 10 townhomes in Langley sold in Langley. That’s right, a 30% sales to listing ratio (a fuller story might be how many of those are in new developments vs. resale…). So what about those Langley condos? There are a bunch being developed right now, so the demand must be there, right? Wrong. 10.3%. Just over 1 sale for every 10 listing. Even slower than May’s 12.9%. So why all the development? Well, remember development takes time. Just last year in June of 2010, the Langley condo market was at 17%. Over-saturation? Maybe. Or maybe the people who normally bought condos – young couples, are now unable to meet new mortgage standards. Hmm. Or maybe investors/speculators who normally could pick up a few new condos to rent/flip can’t do it because of the updated mortgage restrictions. Or maybe all three.
Point is, be in the know. The media is going to take the best headline possible. If you are needing to or interested in buying or selling, ask your REALTOR® to zoom in on the pertinent data.