Posted in: Selling a home, Buying a home, Market insights

What makes a sellers' market, and what does it mean for buyers?

how to calculate housing supply

Key insights

  • When entering the market, it's important to know if buyers or sellers hold the advantage
  • When inventory is low and buyer demand is high, it's considered a sellers' market
  • While our 13-county metro area shows a sellers' market as a whole, small pockets of the region show different patterns

What is a sellers' market?

When there are more buyers looking for homes than there are homes available for sale, it is considered a sellers' market – that is, that the sellers hold the advantage and leverage in the local marketplace. In a typical sellers' market, the following factors are common:

  • Buyers compete over homes due to a shortage
  • Higher home price offers and sold prices
  • Multiple offers and homes selling for more than asking price

How can you tell if it's a sellers' market?

One common way to calculate the existence of a sellers' market is to look at the "months' supply" of homes for sale on the market. This measurement assesses how many months it would take for current market inventory to sell if no new homes were listed and sales continued at today's pace.

To calculate months' supply, use this equation:

Total number of homes for sale // number of homes selling on average each month

Example: 100 homes for sale // 20 homes sold in February 2017 = 5 months' supply

If the months' supply calculation is below six months, sellers hold the advantage and it is a sellers' market. If the calculation is above six months, it's a buyers' market.

Are we in a sellers' market now?

Across our 13-county metro area, there are 2.5 months' supply of homes for sale, which means we are in a clear sellers' market as a whole. However, it's important to remember that real estate is local, and the overall market doesn't always represent what's happening in specific neighborhoods, cities or price points.

Here are a few specific areas that are outliers from our 13-county metro area:

  • Single-family homes in the Calhoun (CARAG) neighborhood of Minneapolis are at 1.4 months' supply, meaning that buyers should expect strong competition and multiple offers.
  • Luxury homes in North Oaks (priced above $500,000) are showing 7.7 months' supply, meaning buyers hold a slight advantage in that area.
  • Starter homes in Burnsville (priced below $250,000) have 1.3 months' supply, indicating that first-time buyers looking south of the river may have quite a bit of competition.
  • Outside the metro, private waterfront homes for sale in Crow Wing County (which includes Brainerd) have 10.9 months' supply. Lake home buyers may be happy to hear that they hold an advantage as they enter the market this summer.

Stats: Northstar MLS

Plan for your market

The advantage in the market can change from one block to the next, so it's important that buyers and sellers alike hire an expert to help them confidently navigate their real estate transaction.

To get in touch with a local neighborhood specialist who can provide you insights as you buy or sell, reach out today.

Be sure to follow #BuyerInsights and #SellerInsights on Facebook, Twitter, Instagram and YouTube for more helpful advice.

Join over {{'43232' | number}} subscribers

Status Definitions

For sale: Properties which are available for showings and purchase

Active contingent: Properties which are available for showing but are under contract with another buyer

Pending: Properties which are under contract with a buyer and are no longer available for showings

Sold: Properties on which the sale has closed.

Coming soon: Properties which will be on the market soon and are not available for showings.

Contingent and Pending statuses may not be available for all listings