If you’re thinking about buying or selling a home, you’ve probably heard people talk about a buyer’s market or a seller’s market. These phrases describe the balance between the number of homes available and the number of people hoping to buy them. That balance can shape your choices, but it doesn’t make the decision for you.

Inventory is the number of homes currently listed for sale. When inventory is low compared with buyer demand, sellers may have more leverage. Well-priced homes can attract multiple offers, and buyers may need to act quickly. When more homes are available, buyers often have more options and room to compare features, negotiate, and take their time.

The local picture matters more than the national headline. One neighborhood might...