What is a balanced market?

Ottawa has a balanced market right now, after several years of being a buyer’s market. Toronto, on the other hand, is a seller’s market. Consumers hear those terms bandied about all the time. What do they mean?

A balanced market is one where  there is a roughly 14-20%  ratio of sales to listings. (You might see 13-20% in some analyses; the Greater Vancouver real estate board, for example, uses 13% as its guideline. And I’ve heard 15% at times too.)

In a seller’s market, the ratio of home sales to active listings is above 20 per cent.

In a buyer’s market, it’s below 12 or 13%.

So the balanced market is in the middle.

Ottawa was  in a buyer’s market until a month or two ago; we’ve moved into a balanced market after a busy July and August. But, we still have around five months’ worth of inventory, and it is taking 90 days on average to sell a home.

If we were to move into a seller’s market, there would be more demand than supply and we would see that 90 days on market  (DOM) average drop

Six years ago, for example, it was about 27 DOM to sell a house here- things were really jumping, and we saw lots of multiple offers. In a balanced market, while there are some multiple offers, on the whole it’s a stable, steady market. Which is great for buyers and sellers.

I can’t even imagine what it most be like in Toronto where it’s around 12 DOM. Frustrating for buyers, I would think, because it means such low inventory that you can expect multiple offers on almost any property that comes up. And for sellers, while they can sell quickly, it creates a problem for them when they have to buy as well.

Anyway, that’s what those terms mean. It takes a lot of properties to move those indicators up or down, so when you see a sudden spike in the regional statistics, you know something is  happening.

A movement from a buyer’s market to a balanced or sellers’ market can be a sign of optimism in the economy  (in Ottawa, the new government, its spending announcements, the LRT construction and a happier public service are all contributing factors to this balanced market, I’d guess) or pessimism (the price of oil in Alberta, for example).

I’ll be watching to see what effect the foreign buyers sale tax has had in BC.

 

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