It's all about the fundamental law of supply and demand.
In a Buyer's Market there is a greater supply of homes and a fewer amount of buyers in the market. This causes the price of homes to depreciate. This is when there is a greater than 7 month supply of homes on the market.
In a Neutral Market there is a balance between homes available and buyers in the market. This causes homes to only appreciate with the rate of inflation. This when there is a 6-7 month supply of homes on the market.
In a Seller's Market there are fewer homes available and buyer's will have to compete for the homes on the market. This causes the price of homes to appreciate. This happens when there are less than 6 months of inventory on the market.
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