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How To Recognize A Seller's Market

The real estate market is always changing – sometimes it swings in favor of buyers and sometimes it swings in favor of sellers. If you haven’t already, check out how to recognize a buyer’s market. This time we’ll be talking about how to recognize a seller’s market. 

There are a variety of factors that contribute the every-day market including the local economy, interest rates, the area and the home. These are important things to note in order to take full advantage of the conditions. Knowing the characteristics to recognize and how to interpret the data is important for both sides.

Here are the characteristics of a seller’s market
•    Low inventory when compared to previous months and/or years
•    Homes are selling faster
•    Less than six months of inventory on the market
•    More homes are selling
•    Median sales prices are going up

Most sources use months of inventory the way to determine if it’s a buyer’s or seller’s market. This is the number of months it would take to sell all existing inventory without adding new listings. Balanced markets usually have a 4-6 month supply of homes – less than that means a seller’s market.

Here’s how to figure out the months of inventory:
1.    Find out the total number of active listings for the month before the current one
2.    Find out the total number of sales or closed transactions for the same timeframe
3.    Divide the total number of listings by the number of sales and you have your months of inventory

Last month in Massachusetts there were 22103 active listings of which only 5748 closed. That means that there are only 3.8 months of inventory aka we’re currently in a seller’s market.

The months of inventory on a more local level:
Boston: 3
Brookline: 2.6
Newton: 2.2

Given that these are highly desirable areas, the seller usually has the upper hand because there are a higher number of people looking to buy and move in then there are people looking to leave.