Are home buyers gaining the upper hand??
High mortgage rates and a lack of options in the resale market are forcing sellers to fork out concessions to entice home buyers, according to a new report.
The report by real-estate brokerage Redfin
That share is up from 31.1% from a year ago.?
Existing-home sales in January fell for the 12th month in a row, per the National Realtors Association. The NAR will publish updated numbers later this month, but in lieu of how mortgage rates have risen, it’s likely that home sales will drop further, since higher costs and low inventory put off buyers.
In response to the market dynamics, home sellers are offering to cover the cost of repairs, buy down buyers’ mortgage rates and cover closing costs, as high rates impact buyers’ affordability and demand.
The biggest increases in concessions were in Phoenix and Seattle.
In addition to concessions, 13% of home sales included a price cut and a final sale price that was below the list price – and this was in addition to a concession.?
Redfin describes a concession as when a seller provides something that helps reduce the buyers’ total cost of purchasing a home.
“Concessions have become increasingly common because rising mortgage rates and stubbornly high home prices have caused many buyers to put their plans on hold, which has motivated sellers to throw in freebies to attract the buyers who remain,” the report’s authors wrote.
“‘The housing market has done a 180 since 2021, when a surge in homebuyer competition fueled by rock-bottom mortgage rates forced buyers to offer everything but the kitchen sink to win.’”
“The housing market has done a 180 since 2021, when a surge in homebuyer competition fueled by rock-bottom mortgage rates forced buyers to offer everything but the kitchen sink to win,” they added.
Elena Fleck, a real-estate agent in Palm Beach who works with Redfin, said that “buyers today are way more demanding and selective.”
“They’re willing to wait to find the perfect house, which wasn’t the case during the pandemic homebuying boom,” she added. “Buyers don’t want to put any additional funds into repairs. I had a few sellers offer credits for new roofs to close the deal. We’re also seeing more buyers ask for credits toward their closing costs.”
Some sellers are also accepting offers below their asking price, on top of concessions.
Redfin said a quarter of home sales recorded by agents included both a concession and a final sale price that went below list price.
The biggest increase in concessions were in Seattle, where 51.6% of home sales involved a seller offering a rate buydown, or repairs, or such. That share was up from 20.1% a year ago.
Las Vegas, Denver, San Diego, and Phoenix followed.?
Sellers in Las Vegas were also the most likely to offer concessions to buyers: 77.4% of home sales in Las Vegas involved a seller offering a concession to a buyer, Redfin said.?
Many of these are pandemic boomtowns, while others are traditionally expensive real-estate markets.
Two metro areas that stood firm against seller concessions were Austin and Chicago. In these two metro areas, concessions were less common this year than a year ago, Redfin said.