Before we dive into the topic of Balanced Real Estate Market and see some sample questions with breakdown explanation of the solution, it is important to understand the different types of real estate markets that we see as real estate agents.

Real estate is a cyclical business. It works in cycles, so we do not have the same type of market the entire time. Markets will go up and down, so we go through a cycle. We go through cycles in this industry, and as real estate professionals, we need to be aware of what the current market conditions are so that we are able to serve our clients the best.

We are not going to deal with the properties, or deal with the clients in the same way if it is a buyer’s market versus a seller’s market. If we know what kind of market it is, we are able to advise our clients in a much better way, and we are able to support them at a greater level.

Types of Real Estate Markets

1. Balanced Market
2. Buyers’ Market
3. Sellers’ Market

Each type of market will have its own characteristics, conditions that are only present in that type of a market condition. So, we need to be able to understand the conditions that we are expecting in that market in order to serve our clients the best. Today we will look at a balanced market.

What is a Balanced Real Estate Market?

A balanced market is when the supply of properties and the number of potential buyers is the same. So, there is a balance between the number of properties that are listed for sale, as well as the people that are looking to buy properties. Here, the number is not actually a specific number but a range that defines an average level of both the variables in comparison.

Characteristics of a Balanced Market

Demand-Supply Ratio: the balance between the demand and supply. The demand for the properties is equal to the supply of properties, so the demand and supply are equal. So, the number of buyers will be equal to the number of sellers. People looking for properties is about the same as the number of properties that are being listed.

Property Prices: Another thing that we’ll find during balanced market conditions is stable property prices. Because the demand and supply are equal, the number of buyers and sellers are balanced, the property prices will stay stable, so we do not see price fluctuations or surge too much. There are less chances for multiple bid situations to be seen in this type of market. So, property prices tend to stay stable.

Interest Rates: Affordable interest rate is another contributing factor that allows favouring of balanced market conditions. When the interest rates are stable, we see that people are not in a rush to buy properties, because they are not expecting interest rates to go up. People are not waiting to buy properties in anticipation of interest rates going down, so there is no rush to either buy properties or to wait for interest rates to decline.

Buyer-Seller Favorable: The name ‘balanced’ itself suggests that it is favors both the buyers and the sellers.

Market Conditions: The market conditions are favorable and balanced. Transactions are generally smooth with a reasonable number of sale transactions.

Competition: Because the supply and demand are balanced, we will see, as properties get sold more and more properties will be listed, and there is no oversupply of properties, neither is there undersupply of properties, so properties that come on the market get sold, and new properties come onto the market so there’s a reasonable number of properties for sale, so buyers don’t have to fight over the properties.

Timeframe: The properties are sold within a rational timeframe. The total number of days on the market for any given property will be appropriate, so properties are not sitting on the market for too long, neither are they getting sold quickly. As a result of that, people have time to make their decisions, they can check different properties around. There is no rush to buy the properties as well as the wait times for the sellers to sell the property is also in the common date-range.

SAMPLE QUESTIONS

Now let us look at some of the sample questions that we may see around this topic.

Example 1:

What type of market is said to occur when the number of properties in a local area is equal to the number of buyers?

A. balanced market
B. buyer’s market
C. seller’s market
D. all the above.

The correct answer is A. As we discussed earlier, under balanced market conditions, the number of buyers is equal to several sellers.

Example 2:

What market is characterized by stable property prices?

A. buyer’s market
B. balanced market
C. seller’s market
D. all of the above

The correct answer is B. Under a balanced market, the property prices will be stable, there is no need to rush into buying a property, as the demand is matched with supply, properties will sell within a reasonable timeframe, and supply and demand are equal, so they stay relatively constant.

These are some sample questions with solutions and reasoning to get you understand the basic concept of Balanced Market. 

If you feel this interesting and can think of making a career in the Alberta Real Estate Industry, get in touch with us at 587.936.7779. 

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