When people talk about the housing market, you’ll often hear terms like buyer’s market, seller’s market, or balanced market. These labels get used a lot, but rarely explained in a way that actually helps buyers and sellers understand what’s happening or how it affects their decisions.
At its core, the type of ‘market’ we’re in comes down to supply and demand. How many homes are available, how many buyers are actively purchasing, and how quickly those homes are selling.
Let’s break each one down and explain how these markets are measured.
The Key Metric: Months of Inventory
Before going through the details of each market type, it helps to understand the main statistic that we use to define them.
Months of inventory (also called months of supply) measures how long it would take to sell all currently available homes if no new listings came to market.
The calculation is simple:
Number of current, active listings
Divided by the number of homes sold in the past month
For example:
600 homes for sale
100 homes sold last month
600 ÷ 100 = 6 months of inventory
By measuring the speed with which inventory is absorbed (ie, houses are sold), that one number tells us a lot about who has leverage in the market.
Buyer’s Market
A buyer’s market exists when there are more homes for sale than there are active buyers.
How it shows up in the numbers
Typically 6 months of inventory or more
Higher active listing counts
Slower sales pace
Longer days on market
What this means in practice
In a buyer’s market, choice is plentiful. Buyers can take more time on all but the most high-demand properties, compare options, and walk away if a house doesn’t feel right. The majority of homes don’t tend to sell instantly, and sellers (not buyers!) often need to compete with one another for attention.
Prices in a buyer’s market may:
- Stay Flat
- Increase Slowly
- Decrease, sometimes rapidly depending on how much excess inventory exists
Negotiations also tend to favour buyers. Conditions like financing or home inspections are more common, and price reductions are not unusual if a property is overpriced.
For sellers, this is a market where pricing and presentation matter more than ever. Homes that are priced based on yesterday’s market or presented poorly can sit for a long time.
Seller’s Market
A seller’s market exists when there are more buyers than available homes.
How it shows up in the numbers
Typically under 3 months of inventory
Low listing counts
Fast sales
Strong sales-to-new-listings ratios [how many new listings sell compared to how many come on the market]
What this means in practice
In a seller’s market, competition among buyers is the defining feature. Fewer homes are available, and desirable properties often attract significant interest.
Prices in a seller’s market tend to:
Rise more quickly
Push toward the upper end of recent comparable sales
Sometimes exceed asking price
Multiple offers become more common, and sellers often have the upper hand in negotiations. Buyers may need to be flexible on conditions, closing dates, or terms to stay competitive.
That said, not every home automatically benefits equally. Even in strong seller’s markets, location, condition, and price still matter.
Balanced Market
A balanced market sits between the two extremes, where supply and demand are reasonably aligned.
How it shows up in the numbers
Typically 4 to 6 months of inventory
Listings and sales moving at similar rates
Stable pricing trends
What this means in practice
In a balanced market, neither side has a clear advantage. Buyers have options, but well-priced homes still sell within a reasonable timeframe. Sellers can expect fair market value if their home is priced appropriately, but not automatic bidding wars.
Prices in a balanced market tend to:
Move gradually
Reflect recent comparable sales closely
Be less volatile month to month
Negotiations feel more measured. Conditional offers are common, and both parties generally expect a reasonable give-and-take.
Why This Matters Before You Buy or Sell
Understanding what type of market you’re entering helps set realistic expectations.
Buyers can better judge how aggressive they need to be
Sellers can price accurately and avoid costly missteps
Both sides can plan timelines, conditions, and strategies more effectively
Market type can also vary by neighbourhood, price range, and property type. It’s entirely possible for one area to behave like a seller’s market while another feels balanced or even buyer-friendly.
That’s why broad headlines rarely tell the whole story, and why guessing at market conditions based on anything less than demonstrable facts and real market statistics is rarely helpful.
Talk to a Real Estate Professional
Before making any major decisions, it’s worth understanding how the numbers apply to your specific situation.
Local data, recent sales, and current inventory all play a role in determining strategy. A good agent doesn’t just label the market, they explain how it affects pricing, negotiations, and outcomes for your particular home or budget.
