What is a buyer's market and a seller's market?

A Real Estate Market Update for Halifax, Nova Scotia

​It's no secret that the real estate market has been on a roller coaster ride over the past few years. We saw prices skyrocket at the beginning of the pandemic and continue to climb until Q3 of 2022 before dropping suddenly, only to start climbing again in December of the same year. 

​As a result of these fluctuations, I have had a number of people asking if we are in a buyer’s market or a seller’s market. In this post, we will take a look at the difference between a buyer's market and a seller's market and what that means for those looking to buy or sell a home in our city.

Let’s start with months of inventory, which is a great way to measure supply and demand. 

What is Months of Inventory?

Months of Inventory in real estate is defined as the amount of time (or months) it would take for all current MLS® listings to sell, given that no new listings enter the market. This is calculated by dividing the total number of homes for sale by the total number of homes sold for a given period of time – usually done on a monthly basis.

Months of Inventory = Total Units on Market in Month X / Total Units Sold in Month X

What is a Buyer's Market? 

A buyer's market exists when there are more homes for sale than there are buyers searching for homes. This often happens in areas where the population is shrinking or where there has been a lot of new construction. When we see more than 4 or more months of inventory, we are in a buyer's market. Prices tend to go down in a buyer's market because there is more supply than demand.

What is a Seller's Market? 

A seller's market exists when there are more buyers searching for homes than there are homes for sale. This often happens when interest rates are low, or the economy is doing well. When months of inventory are low (2 months or lower), the market is usually in seller’s territory.

In a seller's market, the party listing their property has more negotiating power and can often get a higher price for their home.

So, which market are we in right now? 

Over the last two years, it was obvious we were in a seller’s market; however, a significant decrease in prices between April - July 2022 and an increase in inventory between January and September—coupled with national headlines reporting a cooling of the real estate market—has resulted in uncertainty as to which type of market we are in. 

However, when we look at months of inventory, we are currently sitting at 1.3 months of inventory (up from 0.3 in Jan 2022), putting us in a seller's market.

This also aligns with the factors that lead to buyer’s or seller’s markets. 

A buyer’s market is characterized by shrinking populations and over-building. In Nova Scotia, our population is growing at a rate faster than the national population growth:

Further, according to the province, it’s estimated the Halifax region is short at least 17,000 housing units, and this number is growing. Not to mention interest rates are still considered to be low despite recent increases (when we look at the last 35 years, the average interest rate has been 6.5%) and high inflation. 

When speaking with sellers, there is a lot of regrets that they didn’t list a year ago; however, it's not too late for sellers to take advantage of this market. 

Thinking of buying this spring? Check out my next blog post for tips for navigating a seller's market. The real estate market is always changing, so it's important to stay up-to-date on the latest trends if you're thinking of buying or selling a home.