BAM Key Details:
- A new Redfin report shows 42.9% of home sales during the three months ending April 30 involved seller concessions—just under February’s record high of 45.6% and nearly double the 25.5% from April 2022.
- While sellers in some parts of the U.S. are offering freebies to attract buyers, thanks to the dampening effect of high mortgage rates, sellers in markets with severe housing shortages don’t need to.
That’s according to a new report from Redfin, which highlighted the difference between the 6% drop in the likelihood of a seller giving concessions in April, compared to February, and the 18% spring drop for the previous two years.
Spring typically brings a steeper drop in seller concessions as more buyers enter the market. But the combination of high mortgage rates and high home prices have kept many buyers on the sidelines this year, making it necessary for sellers in some parts of the country to offer freebies or even reduce their asking price—especially if they need to move.
And sellers who are moving, by necessity, are more likely to move outside their current metro than to stay within it—because, in many cases, the reason for the move requires relocating to a different part of the country (a new job, caring for relatives, etc.).
In markets where home values have dropped the most, it’s hard for agents to imagine sellers jumping into the market and making concessions when they’re already likely to sell at a loss.
But even in these markets, when moving has to happen, sellers are willing to make the concessions necessary to sell quickly. And moving to a more affordable area becomes all the more attractive (if that’s an option).
In other markets, inventory is so low that sellers have the upper hand. And overall, 46% of the home offers written by Redfin agents faced competition in April—compared to 59% one year ago.
Top three reasons why sellers are offering concessions
Sellers this spring are offering buyers concessions more frequently than last year for a number of reasons—the following three being the most evident:
- Buyers are stepping back from the market in reaction to mortgage rates climbing to 7% and beyond, driving up the cost of homeownership—even with the 4% overall drop in home prices. The severe shortage of housing supply is also discouraging buyers.
- For sellers who need to sell, concessions are a must in some markets. Many of those listing their homes are doing so because they need to move—whether because of a divorce, a new job in a different area, or the need for a larger home. Driven by the need to sell quickly, these sellers are more likely to offer concessions to buyers.
- Homebuilders are offering freebies to entice buyers. During the pandemic, builders worked to capitalize on the moving frenzy—especially in pandemic hotspots. Now that demand has cooled, builders are motivated to unload their backlog inventory and are wooing buyers with money toward closing costs, gift cards, and even free cars.
Buyers don’t have the advantage in every market, though. In some, inventory is so low that homebuyers can expect competition for available homes—especially the more affordable ones.
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. 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, which gets credited to buyers at closing, to offload properties. Buyers are using the extra cash to cover closing costs or buy down their mortgage rate.
Sellers are also accepting offers below their asking price
In 15.7% of home sales—during the three months ending April 30—sellers reduced their asking price in addition to making concessions to the eventual buyer. That’s almost four times the 4.2% from a year ago.
For about one in five (20.5%) of the homes sold during that period, sellers accepted a final sale price below their asking price while also offering a concession to persuade the buyer—up from roughly 7% one year ago.
All these shares slid down from their record highs in February—typical for the spring buyer season—but 2023’s declines are significantly smaller than those for 2021 and 2022.
Seller concessions increased the most in pandemic boomtowns
Some areas of the country recorded more seller concessions than others. Pandemic boomtowns, in particular, saw more sellers making concessions and reducing their prices than most of their markets.
Here are the top five markets with the biggest increases in seller concessions:
- Tampa, FL (58%, up from 12%)
- Nashville, TN (49%, up from 5.6%)
- Salt Lake City, UT (46.8%, up from 12.3%)
- Seattle, WA (45.7%, up from 11.7%)
- Raleigh, NC (64.6%, up from 31.2%)
The share of sellers giving concessions to buyers increased over the last year in all the metros analyzed for Redfin’s report.
Seller concessions are most common in Phoenix, San Diego, and Raleigh
Raleigh is also one of the U.S. metros where seller concessions are most common, though Phoenix stands at the top of that list with sellers giving concessions in 68.5% of home sales during those three months ending April 30—nearly twice the 35.9% share from April 2022.
Here are the top five metros with the highest shares of home sales involving seller concessions:
- Phoenix, AZ (68.5%)
- San Diego, CA (66.1%)
- Raleigh, NC (64.6%)
- Las Vegas, NV (59.1%)
- Denver, CO (58.1%)
In all these markets, buyer demand exploded during the pandemic and is now cooling.
Read the full report for more details.
Takeaways for real estate agents
If you’re in a market where sellers are making concessions more frequently, both buyers and sellers need to know this information—ideally, before they list their homes or make an offer.
Likewise in markets where buyers are more likely to encounter competition in their search for an affordable home. Both sides need to know what they can reasonably expect, what homes are selling for in their neighborhood, and what they can do to improve their chances of selling or buying a home.
Be the resource they need, and keep them up to date on any changes at the local and macro level that could affect them.