Difference Between Buyers' and Sellers' Market

During sellers' markets, homes sell quickly and sellers have a lot of pricing power. As a result, prices rise more rapidly than at other times. During buyers' markets, homes may sit on the market for awhile before selling, so sellers become more flexible and may even drop their prices.

The market is determined by supply and demand.

In real estate, the relationship between supply and demand is calculated as "available inventory." At the current sales pace, how long would it take to sell the total number of houses available on the market? That is how the real estate industry measures inventory.

Inventory is measured in weeks and months. Longer inventory times are associated with buyers' markets. Shorter inventory periods are associated with sellers' markets. Some buyers and sellers hope to time their purchase to take advantage of market cycles.

Although there is no magical number that determines buyers/sellers market in regards to inventory, market conditions determine it. Currently in Chicago, the typical balance between a buyer's and seller's market is approximately 5 months inventory.

Anything over 5 month inventory equals buyer's market.
Anything less than 5 month inventory equals seller's market.

Things to consider in a sellers' market:

Different niches markets can behave contrary to the general market in which they reside. A property with a balcony or "great" location will typically have a broader demand base than one without, for example.

Things to consider in a buyers' market:

A common misconception about a buyers' market is that within this type of market sellers are placed in a position where they have to sell their properties at less than market value. This is not the typical case. However, the time that a property in a buyers market is significantly longer which in some cases will cause motivated sellers to accept below market offer. As long as the seller is in a comfortable position there is no reason to expect them to consider below market offers.