We talk a lot about the “kind of market” we’re in. Is it a buyer’s market? Is it a seller’s market? Is it a balanced market? What do those terms really mean, and what kind of market are we looking at right now in the Fall of 2015?
Note: Months of Supply is the measure of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales.
A Buyer’s Market is a market that is saturated with listing inventory. There are many homes listed, they are staying on the market for a long time, and they may have to do price reductions. This type of high inventory situation is what real estate agents typically mean when they say we’re in a buyer’s market. More technically, a buyer’s market is one that has more than 7 months of inventory supply.
A Seller’s Market is a market with very low inventory and the inventory that is being sold is moving very quickly. Seller’s have more leverage in this type of market, and buyer’s are forced to compete, driving prices upward. A seller’s market is one with less than 5 months of supply
A Balanced Market is typically one that has between 5 to 7 months of inventory supply. This is a market in which neither buyers or sellers have a marketplace advantage in negotiations.
So, where are we? In the DC Metro region, as of October 2015, we are technically in a seller’s market. There is less than 4 months supply of inventory. Historically, however, buyer’s have rarely experienced the type of buying power than they currently have because of low interest rates on mortgages. Borrowing money to purchase a home right now is extremely cheap when compared to the last 30 years of mortgage interest rates. The below graph demonstrates this unprecedented historical advantage for buyers.
So, if you’ve been putting off your home search until next year, you may want to see what’s out there. Money will almost certainly not be this cheap next year or the year after. Take advantage of these historically interest rates and contact us about your purchase today!