What is a Buyer's Market versus a Seller's Market?

I received a question from a client in Purcellville, Virginia. He asked, “When we talk about buyer's and seller's markets, like what does that even mean?” We assign these labels: if it is a sellers market, then it is a good time to be a seller, not as much of a good time to be a buyer. And obviously, the reverse is true for a buyer's market.

Whe we talk about a buyer and seller's market, what we're talking about is the “saturation rate.”  Hypothetically, if we were to stop listings from coming on the market, but buyers kept buying at the same rate, how long before we ran out? We talk about that in a number of months. If the number of months before we ran out in that hypothetical situation is between zero and three months, then that is what we would consider to be a seller's market. If that number is more than three months and less than six months, that is what we would call a neutral market - neither a buyer nor a seller's market. If it is greater than six months, that is what we would call, traditionally, a buyer's market. 

There is actual quantification for a buyer’s market or a seller's market. There is an actual way to figure that out. In Northern Virginia, we often will find that we are typically in a seller's market unless you are in some of the outlying communities like some of the much smaller dots on the map such as Stephens City, Waterford or Lovettsville. Some of these smaller towns, you can sometimes wind up in a much softer market, maybe even a buyer's market in some of these situations.

The price point matters, too. For instance in Purcellville, the bread and butter price point there may be $500,000 or $600,000. Elsewhere, in Winchester or in Stephens City, Frederick County, that number may be closer to $250,000 to $300,000. But if you are well above what the average price point is - you have a $3 million house in Purcellville or  a $1 million property in Frederick County - the price point may push you into a buyer's market just simply by the price alone.

If you ever have questions about anything about real estate or terminologies you hear, never hesitate to reach out. Call me at 571-393-1082 or email [email protected]. I am always happy to help out.