What constitutes a balanced market?
That is a question I’ve been getting recently as things are starting to even out a bit in our region, albeit quite slowly. It’s not a straight-up numerical target, though historical analysis of past balanced markets gives us some clues about what range some of the key data points will fall in.
Let’s start with contract terms. A balanced market is one where the financial terms and the risks in contracts are fairly distributed between buyers and sellers. Things like home inspections and radon tests with short periods (think under a week) would be a sign of that. Reasonable financing contingencies with automatic terminations would be another indicator, along with deposits in the 2%-3% range. Also instances of closing cost assistance if that was somewhat mitigated out by a higher offer price.
How about market data points? You’d probably be looking at Median Days on the Market in the 30-60 day range, likely more towards the 60 figure. Annual price appreciation in the 2% to 4% range. Local inventory levels would probably need to be in the 6,000 to 8,000 range depending on demand.
After 36 years in the business I’ve been through it all. Balanced markets, full on sellers markets, and stone cold buyers markets. So I’ll keep you informed about where we stand, but if you’d like to play along at home then use these numbers to track what’s going on for yourselves and you’ll be able to see ahead a little bit too.
It’s a good life.
Chris
