In a key sign that the tide is turning in favor of homebuyers, sellers made concessions to buyers in 41.9% of home sales in the fourth quarter – the highest share of any three-month period on record. from Redfin, according to a new report from the tech-focused real estate brokerage.
This represents an increase from just over 30% in the previous quarter and the fourth quarter of 2021, and exceeds the previous high of 40.8% in the three months ending in July 2020, when the housing market fell. almost stopped due to the start of the pandemic. . Redfin’s dealership records date back to July 2020 and are based on data submitted by Redfin’s buyers’ agents.
Concessions have returned as rising mortgage rates, inflation and economic uncertainty dampened demand for home purchases, giving buyers who remain in the market greater bargaining power.
It’s a stark change from the pandemic home-buying frenzy of late 2020 and 2021, when record mortgage rates fueled fierce competition, forcing most buyers to bid above asking price and forfeit all contingencies just so that their offers are taken seriously.
“Buyers are asking sellers for things that haven’t been seen in the past few years,” said Van Welborn, a Redfin real estate agent in Phoenix. “They feel empowered, partly because their offer is often the only one, and partly because they know sellers have built up so much equity during the pandemic that they can afford to make significant concessions.”
Welborn added, “I recently helped one of my buyers negotiate a $10,000 loan for a new roof and some other repairs. We originally asked for $15,000, but were happy with $10,000 because the owner also agreed to sell for less than the asking price.
Homeowners are increasingly selling below their desired price as the housing market slows. A record 22% of home sales recorded by Redfin buyers’ agents in the fourth quarter included both a concession and a final sale price below the listing price, while a record 19% included at the both a grant and a reduction in the listing price that occurred while the home was on the market. A record 11% included all three.
Phoenix saw the biggest jump in concessions
In Phoenix, sellers conceded to buyers 62.9% of home sales in the fourth quarter, down from 33.2% a year earlier. This increase of 29.7 percentage points is the largest among the 25 metropolitan areas for which data was available. Next come Seattle (25.6 percentage points), Las Vegas (22.2 percentage points), San Diego (20.7 percentage points) and Detroit (20.4 percentage points).
Phoenix and Las Vegas are among the fastest cooling markets after gaining popularity during the pandemic as dozens of remote workers moved in, seeking relatively affordable prices and warm weather.
“It’s taken a while, but seller expectations are coming down to earth,” Welborn said. “Concessions were common before the pandemic, and we may be returning to that norm. The sellers realize they won’t get $80,000 over the asking price like their neighbor did last year.
Welborn said he’s recently seen sellers offer loans of up to $25,000 to cover repairs and closing costs, and they’re also offering to pay 2-1 mortgage rate buyouts and guarantees on Appliances.
There were four metros in which concessions were less common than a year ago. In Austin, sellers made concessions to buyers in 33.3% of home sales, down from 38.1% a year earlier (-4.8 percentage points). Next come Philadelphia (-2.7 percentage points), New York (-2.4 percentage points) and Chicago (-1.6 percentage points).
Concessions are most common in San Diego
In San Diego, sellers conceded to buyers in 73% of fourth-quarter home sales, the highest share among metros analyzed by Redfin (San Diego also had the highest share a year ago) . Next come Phoenix (62.9%), Portland, Oregon (61.6%), Las Vegas (61.3%) and Denver (58.4%).
In New York, sellers made concessions to buyers in 13.4% of home sales, the lowest share among the metros analyzed by Redfin. It was followed by San Jose, California (14.4%), Boston (17.5%), Philadelphia (22%) and Austin (33.3%).