What is a buyers' market?
Key takeaways
- Many Canadian housing markets can currently be considered “buyers’ markets” as supply outweighs demand.
- A buyers’ market offers the opportunity to negotiate a lower purchasing price on a home, as well as include other conditions, such as financing.
- Today’s buyers’ market conditions may not last long as interest rates are poised to lower further, increasing demand and urgency among buyers.
Many Canadian homeowners don’t remember a time when it wasn’t a sellers’ market. House prices began their meteoric rise roughly 20 years ago, in the early 2000s, conditioning an entire generation to consider bidding wars and unconditional offers the norm.
Those days may finally be over, and a buyers’ market is beginning to emerge in some parts of the country. With more homes available and fewer buyers, the balance of power is shifting from those with property to those with cash.
What is a buyers’ market?
In real estate, a buyers' market occurs when there is more supply (i.e. people selling homes) than demand (i.e. people buying them). Buyers typically have the upper hand when this happens, and use their leverage to get better prices and more favourable terms of sale.
One way to tell if there’s a buyers' market is using a calculation called the sales to new listings ratio, or SNLR. This is calculated by dividing the number of homes sold over a period of time by the number of homes listed for sale. For example, if 50 homes were sold and 100 homes were listed for sale in the same time period, the SNLR would be 50%.
The higher the SNLR, the hotter the market. Experts say anything above 60% indicates a sellers' market, while anything below 40% indicates a buyers' market.
Also read: The complete home buying guide
Are we in a buyers' market now?
According to the Canadian Real Estate Association, the national SNLR reached 53.9% in June, indicating a balanced market. But some locales are approaching buyers' market territory.
The Toronto Regional Real Estate Board (TRREB) reported a region-wide SNLR of 40.3% in June, with the City of Toronto itself sitting at 38.2% indicating a buyers' market. Condo listings in particular are becoming more plentiful with year-over-year sales down 28.1%.
On the west coast, Greater Vancouver Realtors reported an SNLR of 42% with sales down 19.1% year over year. Apartment sales have taken the biggest hit in that market as well, falling 20.9% since last year.
The market is looking balanced in the Atlantic provinces, save for New Brunswick where the latest available numbers put the SNLR at just 36%.
Sellers are still in command in the prairie provinces, however. Alberta, Saskatchewan and Manitoba are all still reporting SNLRs well above the 60% threshold for a sellers' market. Quebec is likewise posting strong numbers indicative of a sellers' market.
Is now a good time to buy a home?
Now could be a good time to get a deal on a home as the current buyers' market conditions may not last long.
Competition among buyers could begin heating up soon as interest rates are beginning to fall. The Bank of Canada (BoC) has lowered its key interest rate twice in a row, prompting the Prime rate to fall from 7.20% in May to 6.70% today. That change has a direct effect on variable mortgage rates, improving affordability.
Also read: Home affordability improved in June as interest rates dipped
Fixed mortgage rates are also falling from their high water mark set in October 2023. Discounted five-year fixed mortgage rates peaked at 5.49% but have dropped as low as 4.44% today. If rates continue to move in a favourable direction, a backlog of “wait and see” buyers could enter the market and put pressure on inventory and prices.
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What should I ask for in a buyers' market?
A buyers' market means the power is in the buyers' hands. Homes are no longer receiving multiple offers and are taking longer to sell, and sellers are more likely to make concessions to secure a sale.
When purchasing in a buyers' market, you may want to ask for some or all of these conditions. Your realtor can help you understand each one’s benefits and risks and help you put together an appropriate offer for the home in question.
- Lower selling price. In a buyers' market, sellers may agree to sell for less than their asking price. Your realtor can help you compare recent sales to determine a fair offer.
- Smaller deposit. When the market was at its hottest, deposits of 5%-10% were the norm. In a buyers' market, sellers may be willing to accept less.
- Condition of home inspection. In the absence of multiple offers, sellers may agree to a satisfactory home inspection as a condition of the sale.
- Condition of financing. Sellers may agree to make the sale conditional on the buyer’s ability to get a mortgage.
- Condition of home sale. Sellers may agree to make the sale conditional on the buyer’s ability to sell their existing home.
- Other asks. Sellers may also be more flexible with other details of the agreement like the closing date, adjustments, and whether certain items are included.
The bottom line
While some markets are dipping into buyers' market territory, falling mortgage rates may quickly reverse the trend. Consult with your realtor to get a better understanding of the trends in your area and whether there’s a buyers' market that could help you get a better deal on your next home.