In 1Q 2023, 42.9% of sellers made a buyer concession; in 1Q 2022, it was 25.5%. Some do it to keep a transaction moving forward, others to match homebuilders’ freebies.
SEATTLE – Home sellers gave concessions to buyers in 42.9% of U.S. home sales during the three months ending April 30, up from 25.5% a year earlier, according to a new report from Redfin. That’s just shy of a 45.6% record high hit in February.
The share of home sellers providing concessions – things like money toward repairs, closing costs and mortgage-rate buydowns – likely inched down from February’s peak due to typical seasonality. In the early spring, more buyers typically enter the market. That increases competition, gives sellers more power, and generally lowers the number of concessions.
However, this spring’s drop in buyers concessions is less than it was in the two previous years, in part because sellers had to go the extra mile as mortgage rates began to rise.
Top reasons some sellers are offering concessions
- Buyers backing out of the market. Many house hunters have put buying plans on hold because rising mortgage rates have made homeownership more expensive. And while U.S. home prices have fallen 4% year-to-year, that price drop isn’t enough to offset the cost of higher rates. Another factor dampening demand is the lack of supply: Fewer people are listing their homes because they want to hold onto their current ultra-low mortgage rates.
- Sellers need to sell. Many people who list their homes are moving because they must due to life events, such as divorces, new children or new far-away jobs. These sellers provide concessions because they have a stronger desire to sell their home quickly.
- Competition from new-home builders. There was a surge in homebuilding during the pandemic as builders tried to capitalize on the moving frenzy, especially in pandemic homebuying hotspots. Now that rising rates have pushed many buyers out of the market, builders are trying to sell off their backlog of inventory by offering perks like money toward the buyer’s closing costs, gift cards and even free cars.
In many areas, sellers still don’t have a strong need to offer buyer concessions, however. In some areas, there are so few homes for sale that homebuyers still face stiff competition to buy a home.
“High mortgage rates and low supply have thrown the housing market out of whack, and each deal is different. Some buyers are asking sellers for the sun, the moon and the stars in addition to offering below the asking price, and some are requesting no extras because they’re so motivated to secure one of the few homes on the market,” says Boise, Idaho, Redfin agent Shauna Pendleton. “The one consistency in the market right now is homebuilders handing out freebies. Most builders are offering concessions equal to about 3% of the sale price … to offload properties. Buyers are using the extra cash to cover closing costs or buy down their mortgage rate.”
Sellers also accepting less money for homes
- In 1Q 2023, just over one in seven (15.7%) home sellers dropped their asking price in addition to providing a concession – almost four times the share a year earlier (4.2%).
- Roughly one in five (20.5%) homes that sold in 1Q had a final sale price below the asking price in addition to a concession, up from about 7% a year earlier.
- And about one in 10 (9.4%) had all three: A concession, a price drop and a final sale price below the original list price. That’s up from 2.2% a year earlier.
Those shares have all inched down from record highs set in February, which is typical for this time of year, and 2023’s declines are actually smaller than the declines in 2021 and 2022.
Seller concessions up most in pandemic boomtowns
Tampa saw a bigger year-over-year jump in seller concessions than any other metro analyzed. Tampa sellers gave concessions to buyers in 58% of home sales during the three months ending April 30, up from 12% a year earlier.
The next-biggest increases were in Nashville (49%, up from 5.6%), Salt Lake City (46.8%, up from 12.3%), Seattle (45.7%, up from 11.7%) and Raleigh, North Carolina (64.6%, up from 31.2%).
However, buyers concessions rose year-to-year in all metros analyzed.
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