What is a balanced market?
- Definition of Balanced Market
A balanced market is a term used to describe whether or not supply is meeting demand in the real estate housing market. If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers.
In a balanced market, sellers usually accept reasonable, close-to-list-price offers, while homes generally sit on the market for an average or typical length of time (this can vary from market to market). In a balanced market, housing prices remain stable and, for buyers, there is a usually a sufficient number of homes to compare and choose from.
Why is this term important?
Several factors influence the housing market, including mortgage interest rates, inflation, employment, investment, construction, immigration, government assistance programs, and the health of local and world economies. All of these influence the supply and demand of the market which, in turn, affects prices. In a balanced market, houses are usually sold relatively quickly at reasonable sale prices and list prices tend to stay stable.
A balanced market is one of three market classifications used by experts to describe the balance of supply and demand in the property market. The other two terms—a seller's market and a buyer's market—indicate a shift away from a balanced market. Each market is determined based on the sales-to-active listings ratio.
In a balanced market, the sales-to-active listings ratio is between 12% and 20%.
In a seller's market, there are more buyers looking for homes than there are homes available for sale. In a seller's market prices for homes tend to rise faster than the long-term average inflation rate—the rate at which most homes appreciate, on average, over time. In a seller's market, the sales-to-active listings ratio is greater than 20%.
In a buyer's market, there are more homes for sale, or listings, than there are buyers actively looking to purchase. As a result, price increases slow or stall and, in extreme situations, can even decline. The market is in buyer's territory when the sales-to-active listings ratio is below 12%.
In Canada's real estate market, the usual pattern is for housing markets to enter into seasonal cycles. As spring temperatures start to climb and more buyers start their house hunt, this pushes up the demand for listings and pushes markets closer to a seller's market. The same applies to the fall buying season. Historically, the Canadian real estate market is in a balanced or buyer's market during the summer and winter months, when fewer buyers are looking for their next home. That said, there are
In the world of real estate, the usual pattern is that when spring temperatures start to climb, buyers and sellers start pushing the real estate market into high gear. Around this time, we start to hear the terms “seller’s market,” “buyer’s market,” or “balanced market” being tossed around, and it’s easy to get a general sense of what they mean: seller’s markets mean conditions are favourable for sellers to get higher prices for their homes, buyer’s markets allow buyers to come in at lower prices, and balanced markets are, well, balanced.
Examples of term
In a balanced market, there are many houses to choose from and many purchasers looking for homes.