What is a Seller's Market?

A seller's market exists when there are more sellers than buyers in the market for a certain good or service.

How Does a Seller's Market Work?

Housing is a common place to find a seller's market. Let's say that ABC Town has 100,000 homes and that 3,000 of those homes are for sale. A big manufacturing plant in ABC Town is opening, drawing thousands of people to the town for new jobs. These people want to buy houses and move to ABC town, so they start competing for the 3,000 houses for sale.

Very few people are moving out of ABC Town right now. Accordingly, the few people who are interested in selling a home in ABC Town have the upper hand. There are more buyers than sellers, making ABC Town a seller's market.

Why Does a Seller's Market Matter?

In a seller's market, a seller often can sell goods and services at a higher cost. In our example, a seller's market means that a lot of buyers are competing for houses, and they are therefore more likely to pay more money for their homes. This can translate into big profits for sellers, who might also be able to dictate other terms of the deal (such as who pays the closing costs).