Soft Market

AAA

DEFINITION of 'Soft Market'

A market that has more potential sellers than buyers. A soft market can describe an entire industry, such as the retail market, or a specific asset, such as lumber. This is often referred to as a buyer's market, as the purchasers hold much of the power in negotiations.

INVESTOPEDIA EXPLAINS 'Soft Market'

A soft market can lead to rapid drops in prices as sellers compete to find buyers. Prices will fall as the excess of supply over demand increases. For example, assume that 20 houses are put up for sale and 15 possible buyers enter the market. Five of these houses will not be sold, assuming each buyer purchases one house. This forces the 20 house sellers to compete on price in order to attract a buyer. As a result, this type of housing market would be called soft.

RELATED TERMS
  1. Equilibrium

    The state in which market supply and demand balance each other ...
  2. Demand

    An economic principle that describes a consumer's desire and ...
  3. Supply

    A fundamental economic concept that describes the total amount ...
  4. Market Disruption

    A situation where markets cease to function in a regular manner, ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value ...
Related Articles
  1. Economics

    Economics Basics

  2. Fundamental Analysis

    Where's The Market Headed Now?

  3. thinkstock|istock
    Economics

    Understanding Supply-Side Economics

  4. Active Trading Fundamentals

    Recession: What Does It Mean To Investors?

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center