Sean McKenna

Tough question to answer straight away. It can vary greatly by category and there is no one definition of the term. But I will give it my take:

If one takes the number of all residential homes in an area (supply), and divides that number of total home either Pending or STI (demand), one comes up with a percentage or ratio. The reason you use Pending and STI are that they are listings that buyers have committed to but have not closed and are a fair representation of the general willingness of the buyers to buy.

If 100 total listings all had deals on them it would be a "pure" Seller market. If none of the listings had deals on them it would be a "pure" buyer market. The market is saturated with good inventory and almost every category is in the single digits in terms of pending percentage. That means Buyer market. At the point the percentage goes higher than 50% the scale starts to tip back toward a Seller market.

Or, one can take the total inventory (or in a more narrow category ) and divide that number by how many homes SOLD in a month. This equals "Months of Inventory". If it is over six months of inventory I think it is trending toward a Buyer market. Less that six months is trending toward a Seller market. Here on Camano, and in most areas of Whidbey, the high end (over 800k), and low end (under 250k) have the higher pending percentages and lower 'months of inventory'. It is very tough in NWMLS areas 780 (Camano), and 811 (South Whidbey) to get a stick-built home under 200k. There is some inventory under 250k. It gets less expensive on average as you travel up Whidbey to Oak Harbor. the reverse is true on Camano.
We have seen in Island County a few years of 2 and 3 months of inventory. Now we have 10 and 11 months of inventory. Overall a Buyer market currently. More choice and longer times on market and a Buyer can make a shrewd, perhaps even lowball, offer and get a good deal. You never know, though, who the seller is and what their motivation is. We have lots of second homes and retirees who often have good equity or are of a financial standing that insulates them from national statistics and lending shenanigans.

I concur with Mary Bryson. Island County offers Island lifestyle to city escapees and retirees at a reasonable price with maximum enjoyment within striking distance from the cities or Canada. Just a bridge for Camano, and the option of bridge or ferry for Whidbey. Options and access. We will be a retirement destination for the vast numbers of Boomers just now starting to retire. That means whether trending toward Buyer or trending toward Seller, we are a good investment and will continue to be for many years to come. This is reflected on a general unwillingness on behalf of many Island County sellers to just roll over on price. Plus our prices are not falling, just kind of stalling.

So....convoluted answer to an intricate question. A good Realtor should be able to explain most of these concepts and apply this type of analysis to what home or category you need to investigate.

Good Luck! - Tue Apr 8 2008, 16:14