In real estate, the terms buyer’s and seller’s market seem pretty intuitive. You don’t need to be a rocket scientist to understand that a buyer’s market is a market where buyers have an advantage. In a seller’s market, the seller has the advantage.
However, there are some strict conditions which must be met before the term can get applied. Let’s take a look at these definitions.
In a seller’s market, there are more people buying a home than there are homes. A low supply of homes with a large demand for housing raises the price of a home.
In this market, homes tend to sell quickly. People fear there’ll be a bidding war and brace themselves accordingly. They’re ready to offer higher prices than the listing goes for, giving the owner negotiating power they wouldn’t have otherwise.
Right now, Toronto and the GTA have been seller’s markets for years. Despite immigration rising and the supply of housing reaching critically low levels, it may not be a seller’s market anymore as the market cools off.
Jill Oudil, chair of the Canadian Real Estate Associations summed it up thusly in an interview from this past April: “following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue. For buyers, this slowdown could mean more time to consider options in the market. For sellers, it could necessitate a return to more traditional marketing strategies.”
There are still more people looking to buy a home than there are homes for sale. But with interest rates rising, that may change.
Is Toronto and the GTA suddenly in a buyer’s market? If so, it’d mean that there are more homes for sale than there are buyers looking to buy a home. Given the demand for housing in the past few years, it’s hard to believe such a thing could even be possible!
Perhaps it is. Toronto has boasted the most cranes of any city in North America for years now, so it shouldn’t be surprising that there’s an abundance of housing.
Some factors that can increase the housing supply are new sellers in a market or technological improvements that lower costs associated with production. Perhaps demand is dropping because buyers are leaving the market — a lot is made of the number of people moving to Toronto and the GTA, but there’s also an exodus of people leaving it.
After months of lockdown and people working remotely, some people who preferred living in small units in a thriving downtown opted for larger homes with bigger outdoor spaces in the first few years of the pandemic.
Representation Either Way
For the first time in years, many markets in North American cities are trending towards becoming buyer’s markets. However, that’s what it looks like if you’re taking a broad, macro perspective, and things change a lot when you take a closer look from neighbourhood to neighbourhood.
Some regions are more in demand, while others have dropped off. Local conditions and other factors impact prices at this level. Accordingly, you’ll need to crunch serious numbers, which requires transparency for buyers and sellers.
The digital disrupter Regan McGee built Nobul to give both homebuyers and sellers increased transparency on many levels. Users can compare the agent profiles and pick whose services, fees, experiences, and other factors align best with their needs and budgets.
Because Nobul doesn’t accept payment from real estate agents to get listed or ranked higher, users know they can trust the data on the app. If an agent wants to charge a 5% commission, you can see what they’ve done to earn it. It’s hard to get this level of insight if you just wander into a real estate office and try to ask them yourself.
Reading the market is difficult for anybody to do, as it requires predicting the future to some degree. Usually, people need to buy a home because they need somewhere to live and want to be in a neighbourhood for lifestyle reasons — not every aspect of a purchase is based solely on economics. Still, knowing the difference between a buyer’s and seller’s market can help you make a sound real estate investment.