Sellers are handing out freebies to woo buyers, who have become increasingly likely to back out of deals as mortgage rates have climbed
(NASDAQ: RDFN) — Home sellers gave concessions to buyers in 35% of U.S. home sales during the three months ending Oct. 31, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s little changed from 35.9% one year earlier but up from 27.6% two years earlier.
This is according to data submitted by Redfin buyers’ agents across the country, going back through 2020. A concession is recorded when an agent reports a seller provided something that helped reduce the buyers’ total cost of purchasing the home. That could include money toward repairs, closing costs and/or mortgage-rate buydowns. It does not include situations in which the seller lowered the list price of their home or lowered the price due to a negotiation with a buyer.
Mortgage rates hit the highest level in 23 years in October, which cooled homebuyer demand, driving some sellers to throw in freebies to attract bidders. That marks a reversal from the pandemic homebuying frenzy, when fierce buyer competition made concessions more rare.
“Sellers have become more open to the idea of giving out concessions like cash for repairs and mortgage-rate buydowns, in part because many of them want to get their homes sold quickly due to major life events like divorces and new jobs. Homeowners who don’t have to move are staying put and holding onto their low mortgage rates,” said Seattle Redfin Premier real estate agent David Palmer. “The good news for buyers, aside from more concessions, is that contingent offers are also more feasible in a market like this, meaning house hunters don’t have to waive inspections and other important safeguards.”
Palmer continued: “House hunters are pickier than ever before. It’s really expensive to buy a home today, so they want to make sure they find the right one. Buyers have become increasingly likely to terminate a deal if they don’t get the concessions they want.”
Roughly 53,000 U.S. home-purchase agreements were canceled in September, equal to 16.3% of homes that went under contract that month—the highest percentage since October 2022, when mortgage rates surpassed 7% for the first time in two decades.
Another reason the share of sellers offering concessions has climbed from pandemic lows is that homebuilders, who are offering deals so they can offload inventory, are taking up a growing portion of the market. Nationwide, 30.6% of U.S. single-family homes for sale in the third quarter were new construction. That’s the highest share of any third quarter on record, in large part because there has been a decrease in the number of individual homeowners putting their houses up for sale.
Concessions would likely be even more common today if it weren’t for historically low housing inventory, which is fueling competition in some areas. Inventory is tight because many homeowners are reluctant to put their homes on the market since selling and buying another house would mean giving up their ultra low mortgage rate.
Some Sellers Are Lowering Their Prices in Addition to Offering Concessions
Some sellers are giving out concessions and getting less money than they hoped for their homes, which can occur when a seller cuts their asking price, accepts an offer below their asking price or both.
One in seven (14.4%) homes that sold during the three months ending Oct. 31 had a final sale price below the asking price in addition to a concession. Just over one in 10 (11.5%) homes that sold during the period had a price cut and a concession. And 6.4% had all three—a concession, a price drop and a final sale price below the original list price.
Concessions Are Most Common in Salt Lake City, Least Common in Boston
Sellers in Salt Lake City gave concessions to buyers in 63.3% of home sales in the three months ending Oct. 31, the highest share among the metros Redfin analyzed. Rounding out the top five are San Diego (60.9%), Denver (56.6%), Las Vegas (54.3%) and Raleigh, NC (51.4%).
Many of the metros above saw homebuyer demand soar during the pandemic as remote workers sought out relatively affordable parts of the country. That caused home prices to skyrocket, leaving many people priced out. Cooling demand has prompted more sellers to pull out the stops to attract buyers.
Boston sellers only provided concessions in 11.1% of home sales, the lowest share of the metros in Redfin’s analysis. Next come San Jose, CA (14.4%), New York (14.5%), Philadelphia (15.7%) and Chicago (19%).
Concessions Rose Most in Salt Lake City, Fell Most in Chicago
Salt Lake City saw a bigger year-over-year jump in seller concessions than any other metro Redfin analyzed. Sellers there gave concessions to buyers in 63.3% of home sales during the three months ending Oct. 31, up 25.2 percentage points from a year earlier. The next-biggest increases were in Tampa, FL (+23.5 ppts to 43.1%), Charlotte, NC (+11.6 ppts to 50.8%), Minneapolis (+11.4 ppts to 35.3%) and Dallas (+10.6 ppts to 49.3%).
The share of sellers giving out concessions fell most in Chicago (-21.6 ppts to 19%), followed by Phoenix (-7.8 ppts to 51%), Philadelphia (-6.8 ppts to 15.7%), San Diego (-6.1 ppts to 60.9%) and Washington, D.C. (-5.8 ppts to 32.2%).
To view the full report, including charts and metro-level data, please visit: https://www.redfin.com/news/seller-concessions-october-2023
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.
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