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The Value of a Balanced Market:

Monday, 12 September 2022

Understanding a Balanced Market Understanding a Balanced Market

The term “balanced market” may be one you hear regularly, particularly if you’re paying attention to the real estate market and wondering when it’s the right time to buy or sell a house. But, in order to appreciate the advantages of a balanced market, we must first understand what it is.

How a Balanced Market Works:

A "balanced market" is the term used to describe whether or not supply is meeting demand in the housing market. Simply put, it means there is an equal amount of demand from buyers to equal the supply from sellers.

In a balanced market, sellers are more likely to accept reasonable offers that have conditions, and if priced property, offers will typically reflect the fair value of the home. Homes also tend to sit on the market for a longer period of time, creating more time for buyers to be selective, while also selling quickly enough that homeowners don’t have to jump at their first offer.

Why is this term important?

There are multiple factors that influence the housing market, including inflation, shifts in governmental policies, mortgage interest rates, employment, immigration, and the health of local and world economies. All of these influences contribute to the market’s supply and demand, and the trickle-down effect is what determines the shift of real estate prices. It's important to note also that whatever is happening globally, nationally, or provincially-real estate is always very localized.

A balanced market is one of three market classifications utilized by real estate professionals to describe the balance of supply and demand of properties. The other two terms you may be familiar with are 1) "buyer’s market", and 2) "seller’s market".

Buyer’s vs Seller’s Markets:

There is one primary difference between these two terms. In a seller’s market, there are more buyers looking for homes than there are homes available for sale. Prices for homes rise faster than the average inflation rate that, in a healthy market, accrues over a longer period of time. For those of us in the Niagara region, we can certainly relate to this experience as we have only just come out of one of the biggest examples of a seller’s market shift in Ontario’s history. Over these past two & a half years, property prices surged far over their actual market value. They weren’t a true indication of the value of property.

In a buyer’s market, there are more homes listed for sale than there are active buyers looking to purchase. What can result as an effect of this is price increases in property value slow, stand still or in severe circumstances, can even decline.

Why Balanced Markets Work for Everyone:

After the surge of housing prices in the Niagara region, we are now returning to a balanced market. Here’s why this is a good thing for everyone.

From a buyer’s perspective, you don’t have to rush!  Because the market isn’t so competitive, you often don’t have to grab the first house that becomes available. Making impulsive decisions can often lead to buyer’s remorse further down the road, but in a balanced market, the buyer has time to look at multiple houses and weigh their options. The real estate agent can take the time for 30-60 minute showings, to give the buyer time to get a feel for the home and check out the neighbourhood.   Your real estate agent also has the time to craft a customized offer for you, often getting that offer accepted with the conditions that are designed to protect you.   

From the seller’s perspective, the truth is, they don’t want to feel rushed either. In a seller’s market, the seller is in a constant state of stress, hoping their interested buyer meets financing requirements and the sale closes before the market shifts. What can happen in an inflated market is that, if the market shifts before the deal closes, the buyer can try to reduce their purchase cost if it shifts to a lesser value. Whereas in a balanced market, the seller knows they’re more likely to get a qualified buyer because the agents have time to draft up contracts with financing conditions in place. They can relax knowing they’re going to get a fair market value for their home.  

In a balanced market, there’s far less stress for everyone – the buyer, the seller, and the agent. It’s a much more relaxed people-based market. The truth is, it’s in everyone’s best interests for everyone else involved in the process to be happy. Noone wants hassles or conflict; everyone wants the experience of buying or selling their home to be as painless as possible.  There’s no rush because everyone knows what to expect, and it’s easier to achieve no-conflict resolutions.

What’s Next?

Sellers, while you may feel disappointed that you didn’t sell your house a year ago, the reality is, even though property prices have shifted over the past couple of months, the actual value of your home hasn’t declined. Seller’s markets aren’t real and don’t reflect the true value of your home. The actual fair market value of your home is still worth more than it was this time last year. Real estate is always a great investment, because in a healthy market, it will always accrue in value over time.

If you own a property, now would be a good time to get a home evaluation done, because in a balanced market, you will get a price that is more truly reflective of its actual value. If you’d like to utilize a great free resource that will give you an approximate value of your home, you can use my colleague Steve Dainard, Mortgage Broker’s Home Evaluation Tool. Simply type in your home address and it will provide you an estimate of the value of your home. (*Note: These results are based on current market value provided by a third party and are estimates only. To have an official home evaluation report done, contact me, your real estate professional).

The value of a getting a Home Evaluation Report done is you can determine how much equity you have accrued in your home, and it might be more than you think!  Once you’ve determined your equity, then the question becomes, what can you do with it? 

Stay tuned for my next blog, “Got Equity?” for some of my professional suggestions on what to do with the new-found equity in your home!

Have a question? Get in touch with me! I’m never too busy to return your phone call!

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