There are a number of  factors that may impact 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 cause the condition of supply and demand of the market resulting in affecting prices.

Three classifications can be used to describe the balance of supply and demand in the housing market:

Seller’s market

What a seller’s market mean is that, when there are more people looking to buy then there are homes available. This causes a rise in price above the long-term average rate of inflation. In general, this is indicated by a sales-to-active listings ratio of 20% or higher.

Buyer’s market

On the other hand, what a buyer’s market mean is that, when there are many more homes for sale than there are buyers. As such, prices increase slower than the long-term average rate of inflation. In extreme circumstances this can cause prices to decline. In general,  this is indicated by a sales-to-active listings ratio below 12%.

Balanced market

Last, but not least,  what a balanced market mean is that when a balanced market occurs when supply and demand are about the same, with home prices rising in line with long-term average rate of inflation. In general, this is indicated by a sales-to-active listings ratio between 12% and 20%.

Summary

Over a sustained period of time:

• a seller’s market is represented by a ratio of 20% or higher
• a buyer’s market is represented by a ratio of 11% or lower
• a balanced market rests between 12-19%