The tables are beginning to turn as the housing market leans more in favor of buyers due to falling demand.
Home sellers gave concessions to buyers in 41.9% of home sales in the fourth quarter, the highest share of any three-month period in Redfin's records, according to a report from the technology-powered real estate brokerage.
Concessions increased over 30% in the previous quarter and the fourth quarter of 2021, and outpaced the prior 40.8% high from the three months ended July 2020, when the housing market nearly came to a halt due to the onset of the coronavirus pandemic.
Redfin’s concessions records date back to July 2020 and are based on data submitted by Redfin buyers’ agents.
The concession comeback is a result of rising mortgage rates, inflation, and economic uncertainty, which gives buyers who remain in the market more negotiating power.
The chaotic homebuying frenzy of 2020 and 2021 is a distant memory, as are record-low mortgage rates that caused an overwhelming demand, forcing most buyers to bid over asking price and waive contingencies just to have their offers taken seriously.
“Buyers are asking sellers for things that were unheard of during the past few years,” said Van Welborn, a Redfin real estate agent in Phoenix. “They’re feeling 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 dole out sizable concessions.”
Welborn said he recently helped one buyer negotiate a $10,000 credit for a new roof and a handful of other repairs. They originally asked for $15,000, but were happy with $10,000 because the homeowner also agreed to sell for less than their asking price.
Homeowners are now selling for below their desired price as the housing market slows. A record 22% of home sales in the fourth quarter included both a concession and a final sale price below the listing price, according to Redfin buyers’ agents, while a record 19% included both a concession and a listing-price cut that occurred while the home was on the market.
Phoenix sellers gave concessions to buyers in 62.9% of home sales in the fourth quarter, up from 33.2% a year earlier — the largest jump among the 25 U.S. metropolitan areas for which data was available.
Phoenix and Las Vegas are the fastest-cooling markets after they soared in popularity during the pandemic as hoards of remote workers moved in, searching for affordable housing and warm weather.
“It took a while, but seller expectations are coming back down to earth. Concessions were common before the pandemic, and we may be returning to that norm,” Welborn said. “Sellers realize they’re not going to get $80,000 over the asking price like their neighbor did last year.”
In Welborn’s experience, he’s seen sellers offer credits of as much as $25,000 to cover repairs and closing costs, while also offering to pay for 2-1 mortgage-rate buydowns and warranties on household appliances.
Concessions were less common in some metros compared to last year, including Austin, Texas, where sellers gave concessions to buyers in 33.3% of home sales, down from 38.1% a year earlier (-4.8 ppts). Next came Philadelphia (-2.7 ppts), New York (-2.4 ppts), and Chicago (-1.6 ppts).
Concessions were the most common in San Diego, with sellers giving concessions to buyers in 73% of home sales in the fourth quarter — another record for the highest share among the metros Redfin analyzed. San Diego also had the highest share a year ago. Next came Phoenix (62.9%); Portland, Ore. (61.6%); Las Vegas (61.3%); and Denver (58.4%).
Concessions are less common in New York, where sellers gave concessions to buyers in only 13.4% of home sales, followed by San Jose, Calif. (14.4%), Boston (17.5%), Philadelphia (22%) and Austin (33.3%).
