A buyer’s market is one in which there are more sellers and homes for sale than buyers. Since supply is greater than demand, homes will be lower priced, making them more attractive to buyers. In contrast, a seller’s market is one in which there are lots of buyers and relatively few homes for sale, which leads to multiple offer situations that drive up prices.
A market’s absorption rate is the best way to figure out whether a certain area is behaving as a buyer or seller’s market. The absorption rate is calculated by looking at how many homes sold in a certain month and dividing that number by the total number of homes for sale at the end of the month. An absorption rate of 20% or below is usually deemed a buyer’s market since homes are selling relatively slowly and the number of months of supply is high.