The Difference between Sellers and Buyers Markets

The Difference between Sellers and Buyers Markets

Continuing the conversation… talking about Sellers Markets and Buyers Markets and the differences between them… and whether our old ways of defining markets are really applicable to the present day state of real estate here on the Coast.

Here’s how we always classified markets in the past: “Balanced Markets” were the ones where inventory levels ranged between four and six months’ supply.  Sellers’ Markets were those where the number of listings dropped below the four month mark and Buyers’ Markets were those where the inventory ballooned north of a six months’ supply.

For context, the market we’ve been in for the last decade has been a Sellers Market on steroids with inventory levels reaching new historic lows and a miniscule average of one to two month’s supply.

The last time we saw anything akin to a “Buyers Market” with declining prices and more than six months of supply was 2008-2012. Even though it fits the classic definition, it was anything but a “normal” buyers market because that period also happened to correspond to the second worst financial crisis in American history.

The Great Recession was an eerie, dystopian market where increases in supply and falling prices were direct results of the global mortgage meltdown and the flood of short sales and bank foreclosures that followed in its wake.  

No buyer felt “good” about pulling the trigger after the market tumbled into the mortgage abyss. The simplest loan processes became a form of torture. And short sales often stretched on without resolution for six or eight months.  And worst of all?  No one really knew how much farther prices would fall!   

And those facts point out the inherent contradiction in most Buyers’ Markets: they aren’t the best times to buy, they are the absolute worst times. Even though buyers love to imagine them as stress free zones with lots of great listings like low hanging fruit ripe for the picking…that’s simply not the case.

Before the Great Recession? There was a brief fling with a Buyers Market after the dot.com crash in 2000. But it didn’t amount to more than a fleeting interlude. Once the feds juiced activity with lower rates and more deregulation, the inventory dipped and prices shot right back up again. 

Before that? The only real buyers market we’ve seen over the last 35 years happened between 1990-1996. It came at the end of the wild 1980s run-up and recession that followed, marred as it was by a different banking scandal involving bogus loans. For six years, the supply ranged between 1200 -1800 listings (six to to nine months supply) and by 1994, first-time buyers were out in force again.