In a slow market, more sellers are willing to make a deal
A Redfin report found that nearly 43% of home sellers made concessions in the early spring, a big jump from 26% a year ago.
- In a market with subdued sales activity due to elevated interest rates and low inventory, sellers are more likely to make concessions.
- Areas considered pandemic boomtowns a year or two ago are seeing the highest percentage of concessions from sellers.
- Builders who ended up with excess inventory have also offered more concessions and incentives to entice buyers.
As the market remains sluggish, many sellers and homebuilders are willing to make concessions in order to get a deal done.
A new report from Redfin found nearly 43% of sellers made a concession during the three-month period ending April 30, up from around 26% a year ago.
That's down slightly from the peak in February, but concessions are generally less common in the spring when there's more competition, according to the report. The drop in concessions from winter to spring was also less than in recent years.
Sellers' willingness to make concessions was also seen in an earlier report from Opendoor, which found 76% of sellers and 80% of buyers are willing to make some concessions in order to close a deal on a house.
The likelihood of a concession is particularly high for sellers who need to sell because of life changes, such as divorce or relocating for work. Homebuilders, too, have been offering concessions and finding ways to counter elevated interest rates through mortgage point buydowns.
Because the combination of high mortgage rates and low supply has thrown the housing market out of whack, every deal has been different, said Shauna Pendleton, a Redfin agent in Boise, Idaho.
"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," Pendleton said. "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."
Soon after mortgage interest rates spiked last fall, homebuilders began offering concessions and incentives. By February, 57% of builders were offering incentives, according to a report from the National Association of Home Builders.
While sellers are generally loath to drop their sale price, reductions are happening more often, according to the Redfin report. Nearly 21% of homes had a final sale price below the asking price as well as a concession — up significantly from about 7% a year earlier.
Concessions and price drops were more prevalent in areas that were pandemic boomtowns a couple years ago. Tampa had the biggest year-over-year jump among the metros analyzed, with 58% of sellers willing to make a concession. That was up from just 12% last year.
Nashville (49%, up from 5.6%), Salt Lake City (46.8%, up from 12.3%), and Seattle (45.7%, up from 11.7%) also had significant year-over-year jumps.
The cities where concessions were most common were Phoenix (68.5%), San Diego (66.1%) and Raleigh, North Carolina (64.6%).