Now here's another question that a lot of us are getting:
Is the market turning into a buyer's market?
This is really a market-by-market conversation. But I will tell you that we could easily have a situation in a lot of markets where you actually have a couple different markets within the larger market.
Here's what that means:
Markets aren't just one thing. They are a whole list of price bands, right? So you have lower tier price bands, mid tier price bands, and higher price bands. And in your market, as the market is transitioning, it's not all one thing. So you could have a lower tier price band that's still a strong sellers market. Lots of demand because that's where first time home buyers go, right?
But then as you move up the ladder, you might see that at the higher tiers—the luxury housing, for instance—that it is a buyer's market.
So what's the defining factor here?
You gotta ask yourself, how do I measure this? The way you measure this is by looking at the months of supply. Months of supply is the ultimate measurement.
When you're at six months of supply and below, that is typically what you would call a seller's market. In other words, sellers have a little bit more pricing power. They're gonna be much more apt to get higher prices. And they have a little more ability to command a premium price in most cases.
We've been used to sub-30 day markets. But as we start to climb the ladder, we see it's three or four months, and think, oh my gosh, it's a buyer's market. Not yet. When it hits six months, that's when you truly have crossed that threshold as a buyer's market.
When the number is six months or below, it's a seller's market. When it gets six months or above, it becomes a buyer's market.
In other words, buyers have more power because sellers have a lot more competition. They're not getting as many showings on their house. They're not getting as many offers on their house. So you have a lot more power as a buyer.
When you look at that and you look at your price bands in your market, you say, okay, this price band is still a seller's market. The next price span is a buyer's market. The next price span's a buyer's market. This is where our coaching with our clients is really important.
Setting expectations with sellers. When we're sitting down and saying, "well, in our price span right here, you know, we're actually in a buyer's market already. We have seven months of supply for homes that are a million five." Or whatever your numbers are in your market.
Same thing with buyers. When I'm sitting down with the buyer and say, "Hey, you know what? The market is changing in some price categories, it's a buyer's market. But where you guys are looking, you're looking at the first time home buyer market, there's still a lot of buyers in that market. That's why the supply is only two months. At six months, we would call that the breaking point of becoming a buyer's market. We're still in a pretty strong sellers market. Meaning sellers have some power here because there's not a lot to choose from for buyers."
So we just gotta educate, educate, educate our clients. Be the expert in the room. We're not trying to sell. We're just trying to influence. We're trying to give people good information that will influence their decision making, and they'll make better decisions for themselves. So you want to create informed consumers. And informed consumers become raving fans, right?
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