How to Tell What Kind of Market You’re In — And Why It Matters

Every few months someone asks me “is it a buyer’s market or a seller’s market right now?” and my honest answer is usually “it depends on what you’re buying or selling, and where.” A condo in downtown Toronto and a detached home in Aurora can be in completely different markets at the exact same time. But the framework for figuring it out? That’s the same everywhere, and it’s not complicated once you know what to look at.

The one number that tells you almost everything

Months of inventory. This is the metric that matters most, and it’s surprisingly simple to calculate. Take the total number of active listings in an area, divide by the number of homes that sold last month. The result tells you how long it would take to sell every home on the market if no new listings appeared.

Here’s the rough guide:

Under 3 months = seller’s market. There aren’t enough homes to go around, buyers compete, prices tend to rise. If you’re selling, you have leverage. If you’re buying, expect competition and be ready to move fast.

3 to 5 months = balanced market. Neither side has a huge advantage. Prices are relatively stable. Negotiations actually happen — not the “take it or leave it” energy of a hot market, but real back-and-forth.

Over 5 months = buyer’s market. More homes than buyers. Sellers need to compete for attention, prices can soften, and buyers have room to negotiate on price, conditions, and closing dates.

So what does that actually mean in practice? If you’re looking at detached homes in Vaughan and the months of inventory is sitting at 1.8, that’s a seller’s market — expect multiple offers, homes going over asking, and tight timelines. If the condo market in the same area is at 5.5 months, that’s a different story entirely. Buyers have options. Sellers need to be sharper on price.

This is why the generic “Toronto market update” articles you see everywhere are mostly useless. The GTA isn’t one market. It’s dozens of micro-markets stacked on top of each other.

Absorption rate: the speed of the market

Months of inventory tells you the balance between supply and demand. Absorption rate tells you the speed — what percentage of available listings are actually selling each month.

If there are 100 active listings and 60 sold last month, your absorption rate is 60%. That’s a fast-moving market. If only 15 sold, that’s 15% — things are crawling.

I find this number useful because it shows momentum. A neighbourhood might technically have 4 months of inventory (balanced), but if the absorption rate has been climbing for three straight months, the market is tightening. It’s headed toward seller’s territory even if it’s not there yet. The reverse is true too — balanced on paper but slowing down means buyer conditions are building.

Watching the trend matters more than any single snapshot. One month of data is noise. Three months is a direction.

Price trends: what’s the market actually doing?

This is where most people start, and I think that’s backwards. Prices are the result of supply and demand — they’re a lagging indicator. By the time average prices show a clear trend, the shift happened months ago.

That said, price data still matters. You just need to read it carefully.

Average sale price vs. list price. In a seller’s market, homes routinely sell over asking. In a buyer’s market, they sell below. The spread between list and sale price is a quick temperature check. If homes in Markham are consistently selling 3-5% over list, sellers are in control. If they’re going 2-4% under, buyers have the upper hand.

Days on market. How long are homes sitting before they sell? In a hot market, you’ll see averages of 7 to 15 days. In a slow market, 30, 45, 60+ days. If homes in Richmond Hill were averaging 10 days last spring and now they’re averaging 28, the market has shifted — even if average prices haven’t moved much yet.

The trap people fall into is looking at GTA-wide averages and thinking they apply to their specific situation. They don’t. A $600K condo and a $1.8M detached home live in different universes. Always look at the data for your property type, your price range, and your neighbourhood.

So what do you actually do with this?

If you’re a seller in a seller’s market: you can be more aggressive on price, you might get competing offers, and you can be pickier about conditions. But don’t get greedy — overpricing still kills deals even in a hot market. Price right and let the market do its thing.

If you’re a seller in a buyer’s market: pricing accuracy becomes everything. You’re competing against more listings, and buyers are going to negotiate. Invest heavily in presentation and marketing. This is when the quality of your agent matters most.

If you’re a buyer in a seller’s market: get your financing locked down before you start looking. Be ready to make decisions quickly. Understand that you might lose a few before you win one. Right? It’s frustrating, but being prepared is the best advantage you can give yourself.

If you’re a buyer in a buyer’s market: take your time but don’t wait forever trying to time the bottom. Use your leverage to negotiate on price, request conditions like home inspections, and push for closing dates that work for you.

The market isn’t something that happens to you. It’s context. And once you understand that context, every decision — when to list, what to offer, whether to wait — gets a lot clearer.

Frequently Asked Questions

Where can I find months of inventory data for my neighbourhood?

The Toronto Regional Real Estate Board (TRREB) publishes monthly market statistics broken down by region and home type. Your agent should also be able to pull this data for your specific area. If they can’t tell you the months of inventory for your neighbourhood off the top of their head, that’s a red flag.

Can different property types be in different markets at the same time?

Absolutely, and this happens all the time in the GTA. Right now you might see detached homes in York Region in a relatively balanced market while condos in the same area lean towards buyers. Townhomes might be somewhere in between. Always look at the data for your specific property type — GTA averages will mislead you.

How often does the market shift between buyer’s and seller’s?

There’s no fixed schedule. Major shifts tend to happen in response to interest rate changes, government policy (like mortgage stress tests or foreign buyer rules), or broader economic conditions. Smaller seasonal shifts happen every year — spring typically tightens the market, winter loosens it. Watching the trend over three to six months gives you a much better read than checking once.

Does a buyer’s market mean prices are going to crash?

Not necessarily. A buyer’s market means there’s more supply than demand, which puts downward pressure on prices — but that can mean prices flatten, dip slightly, or just stop climbing as fast. An actual price crash requires something more severe, like a major economic shock or a massive oversupply. Most buyer’s markets in the GTA are moderate, not catastrophic.