There are 3 different stages a real estate market goes through. Each stage is based on the number of people looking to buy and sell real estate at any given time. This can also vary from suburb to suburb as real estate actively heats up during times of rapid development and cools down as other neighborhoods become more favorable or development begins to slow.
- A Buyers Market: This is when there are more people trying to sell homes than buyers available to purchase them. In most cases this causes housing prices to cool off and in some cases even drop lower and lower depending on how long the buyers market lasts for.
- A Sellers Market: Is when there are too many buyers and not enough sellers to keep up with the demand. Prices for homes during this time will generally increase and in some cases will cause prices to bubble.
- A Balanced Market: When there is an equal number of buyers and sellers. Prices during these times can go either up or down (generally up) as there is enough supply to meet the demand.
There is also somewhat of a 4th stage in the market where no one is buying and no one is selling - This would be known as an inactive or stagnant market and can be part of larger economic growth issues in the location.
The economy is the biggest driving gear for movements in the real estate market. The higher the economic growth, the higher housing prices tend to go. As that growth slows or there are mass changes in a government regulation/tax's, the price of property will start to cool until it reaches it's new level of normal.