How to Tell if You’re in a Seller’s Market, and What It Means

A “seller’s market” is a common real estate term used to indicate that sellers have the advantage. These sellers can expect quick offers and sometimes even a closing price higher than their initial listing price.

In a seller’s market, there are also typically more buyers than there is available inventory, a classic “high demand, low supply” scenario that puts an upward pressure on price. As buyers scramble to find homes they like in neighborhoods they want to live in, sellers can entertain competing offers that allow them to hold out for the best price. By contrast, in a market where supply outpaces demand, the seller may take one of the first offers they can get.

So, how do you tell if a market like that in Cumberland, WI real estate currently favors sellers? And what does it mean for everyone? Read on for a quick formula to interpret whether you are in a seller’s market as well as advice for what to do if you are.

How to Calculate if You Are in a Seller’s Market

Concepts like a seller’s market or a market’s current demand level may seem hard to quantify, but there is actually a set formula.

Real estate professionals define a seller’s market as having less than a six month supply of homes currently available. The supply level calculates the time it would theoretically take for all the homes on the market to sell if no new listings were made. If there is more than a six month supply, you may be in a buyer’s market instead.

How do you calculate the current supply level? It is simple, thanks to data that is not hard to find.

First, look at your current local MLS or regional real estate data to see the current number of available homes for sale in your area. This is the total available inventory. Then, take the last month’s number of homes sold in your area or an average of the last few months and divide the supply by that number. Here’s the formula written out

# homes available ÷ # homes sold per month on average = # of months needed to sell current supply

So, if you have 300 homes for sale, but your market sold 60 homes on average, then you have a 5 month supply. This number would qualify the market as a seller’s market.

Markets Can Vary From Block to Block

The trick to using the above formula is that it can be applied to “micro-markets,” such as the month’s supply in a popular neighborhood or for certain types of homes, such as four-bedroom single families.

Because demand and supply within micro-markets can vary greatly, it may be a buyer’s market for small two bedroom homes in your area but very much a seller’s market for two story homes by the lake. By looking at individual supply and paying close attention to sales data, you can estimate your respective market advantage.

What You Should Do if You Are a Buyer in a Seller’s Market

If you are a buyer in a seller’s market, you must consider your initial offer on homes carefully. You may be competing with other bidders, so the homeowner can decide to close without even giving a counter-offer.

You will also have to be very diligent with researching new listings since the type of home you may need may get snatched up quickly. At the same time, you should not be forced to compromise on location or home features.

All of these factors mean that you will need some help. A buyer’s real estate agent can assist you with finding listings that may not be on internet databases and that could sell quickly. Having your own agent can also mean that you have expert, experienced advice at your back when you make an offer on a home.

Put together, you can locate more homes you like and increase your chances of actually getting the keys to your favorite one. Start your search today and navigate a seller’s market more confidently when you start working with a Cumberland, WI buyer’s agent today.