While we have all seen what has happened with interest rates recently (if you haven’t noticed, they’ve gone up quite a bit), the less obvious market factor influencing decision-making is inventory; how many homes are on the market, how long they are active until an offer is received and the percentage fo the list price that is ultimately received by the seller.

Inventory tells the tale. When there are many homes available to purchase on the market, buyers have more options. They can be more selective, they can relax and take their time to find just the right house. Sellers are in just the opposite position when this is the case. Sellers must wait patiently for their house to catch a potential buyer’s eye. If they are unwilling to agree to a buyer’s terms then they risk losing the buyer to another listing down the street. Now switch the scenario to a market that has very few active listings. It isn’t difficult to see how the positions of the buyer and seller are quickly reversed. Buyers have few homes to choose from and more buyers looking at each listing means increased competition. Sellers can take their pick from multiple offers and bidding wars begin. Inventory is probably the most important factor in determining whether we are experiencing a buyer’s market or a seller’s market.

In case you were wondering, we are currently in a sellers market. Inventory levels, for both single-family and townhouse/condos, have decreased somewhat from last year. Average sales prices have increased for single-family residences by about 6% and actually dropped for townhomes/condos by 8%.