Unlike a Buyers Market, a Sellers Market is when there are more buyers looking to purchase a home, than there are sellers to keep up with the demand. Typically, a seller's market is characterized by a sales-to-active listings ratio of 20% or higher. In this type of market, asking prices for homes will generally increase, bidding wars will become more common, and homes will sell within a shorter amount of time. Sellers tend to have a high negotiating power due to multiple offers, and conditional offers may be rejected.
Causes of a sellers market include, but are not limited to,
- Lack of general housing availability
- Slow new project/housing development
- New or speculated economic growth in a given location/city
- A drop in interest rates, which allows more buyers to qualify for homeownership
- Population growth and employment opportunities
In some cases, a prolonged seller's market can cause a housing bubble, also referred to as an "overheated market". As was recorded in places like Vancouver, accelerated demand and limited supply produced a bubble like effect which has caused housing prices to skyrocket upwards of 100% in the years spanning 2013 -2016.
When buying a home in a seller's market, your best is to find a good real estate broker who can help you find a good deal at the right price, and to quickly write a competitive offer.