What Real Estate Market is Best: Hot, Cold or Neutral?

Brian Patterson, Licensed Real Estate Broker Serving NashvilleFranklinBrentwood & Spring Hill, TN - Call Today!  615.438.4941

Supply and demand are what define the "temperature of a real estate market," whether it's a cold (buyers') market, a hot (sellers' ) market or a neutral (normal) market. When there is more supply than demand, it’s a buyer’s market - and when there’s more demand than supply, it’s a seller’s market.  In a neutral (normal) market, there is a fairly large number of homes available and an average number of buyers.

Demand is commonly judged by months of inventory based on closed sales:

  • Buyers Market:  6 or more months of inventory
  • Seller’s Market:  Less than 3 months of inventory 
  • Neutral Market:  3-6 months of inventory

"Hot" (Sellers) Real Estate Markets

A "hot" market is an extremely competitive market - and most advantageous to sellers. It is the best financial market to sell in because there are more buyers than available houses to buy.

 

Serious buyers are often willing to pay more than list price in a hot market, which means sellers can probably sell more quickly - and quite possibly for more than what they're asking for. Typically, multiple offers will be made on each home.  

As a seller, you might be able to demand that buyers waive appraisals and inspections - although it's always a good idea to let a buyer have a home inspection.  As a buyer in a hot market, you need to be ready (pre-approved for a mortgage) and prepared to make a fast offer.  

Give us a call and we will put you in touch with one of our highly-qualified, preferred lenders. Get pre-approved for a mortgage today!  615.438.4941

Make your offer as soon as you can, but never act on something that doesn’t feel "right."  Don’t buy a home just because you feel pressured to make an offer before others do, or you’ll end up with "home buyer’s remorse."   

Signs of a sellers market include:

  • Inventory is very low as compared to previous months or years
  • Less than six months of inventory is on the market
  • Comparable sale prices are lower than active listing prices.
  • More buyers are purchasing - resulting in higher closed sale numbers
  • Median sales prices are increasing
  • For Sale signs up for only a few days before a pending/sold sign is attached

"Neutral" (Normal) Real Estate Markets


Neutral Real Estate MarketsTypically, when the temperature of the market is normal or neutral, there's a fairly large number of homes available and an average number of buyers. A normal market doesn't necessarily favor buyers or the sellers.   

In a neutral market, the chances to negotiate are higher than in a hot market.  Buyers can expect to make offers at or lower than the asking price and negotiate a price at least somewhat less than what the sellers are asking.  

Signs of a normal or neutral market include:

  • Inventory is normal as compared to previous normal months/years
  • Three to six months of inventory is on the market
  • Comparable sale prices are close to active listing prices
  • Sales numbers have stabilized.
  • Median sales prices are flattened
  • For Sale signs replaced with pending/sold signs within 30 to 45 days

"Cold" (Buyers) Real Estate Markets


In a cold market, there are more homes available for sale than buyers to purchase them. Since buyers have more homes to choose from, it increases the odds a buyer will find that "perfect home."  Houses may be listed for more than a year and prices of houses listed may drop considerably in a buyers market.

If you are a buyer looking to a purchase home in a cold market, this is the best financial market to buy in. You have the time to make an offer that works to your best interest. Also, It's not uncommon to make a low-ball offer and find that sellers are willing to negotiate and might even be willing to pay some or all of your closing costs.  

Signs of a cold market include:   

  • Inventory is high compared to previous months/years
  • More than six months of inventory is on the market
  • Comparable sale prices are higher than active listing prices
  • Fewer buyers are purchasing - resulting in lower closed sales numbers
  • Median sales prices are declining
  • For Sale signs are stay up longer - resulting in longer days on the market

MORE GREATER NASHVILLE HOME BUYER INFO

Brian Patterson, Licensed Real Estate Broker Serving NashvilleFranklinBrentwood & Spring Hill, TN - Call Today!  615.438.4941

We focus our comprehensive buyer and seller real estate services in the following Greater Nashville communities:

Brian Patterson, Associate Broker, RE/MAX Fine HomesWhether you're ready to buy a home in the Nashville areasell your existing home, or invest in Nashville area real estate, our team of experienced real estate professionals will work relentlessly to make sure your experience is a positive and rewarding one!

We look forward to helping you achieve your Greater Nashville area real estate goals. Give us a call or send us an email today!

Over 15 years experience helping Buyers and Sellers!!
"The Realtor Who Knows Construction"

Brian Patterson
Associate Broker
RE/MAX Fine Homes
1624 Westgate Circle Suite 125 
Brentwood, Tn 37027
Cell: (Direct615.438.4941