Homesellers gave concessions to buyers in 41.9 percent of transactions in the fourth quarter, the highest share of any three-month period in Redfin’s records, according to a new report.
That’s up from just over 30 percent in both the previous quarter and the fourth quarter of 2021 and outpaces the prior 40.8 percent high from the three months ending July 2020, when the housing market nearly ground to a halt due to the onset of the pandemic.
Redfin’s concessions records date back to July 2020 and are based on data submitted by Redfin buyers’ agents.
Concessions have made a comeback as rising mortgage rates, inflation and economic uncertainty have dampened homebuying demand, giving the buyers who remain in the market increased negotiating power.
That’s a stark shift from the pandemic homebuying frenzy of late 2020 and 2021, when record-low mortgage rates fueled fierce competition, forcing most buyers to bid over the asking price and waive every contingency 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, in a release. “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 continued: “I recently helped one of my buyers negotiate a $10,000 credit for a new roof and a handful of other repairs. We 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 increasingly selling for below their desired price as the housing market slows. A record 22 percent 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 percent included both a concession and a listing-price cut that occurred while the home was on the market. A record 11 percent included all three.
Phoenix sees largest concession jump
In Phoenix, sellers gave concessions to buyers in 62.9 percent of home sales in the fourth quarter, up from 33.2 percent a year earlier. That 29.7-percentage-point increase is the largest among the 25 U.S. metro areas for which data was available. Next came Seattle (25.6 percent), Las Vegas (22.2 percent), San Diego (20.7 percent) and Detroit (20.4 percent).
Phoenix and Las Vegas are among the fastest-cooling markets after they soared in popularity during the pandemic as scores of remote workers moved in, searching for relative affordability and warm weather, according to Redfin.
“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.”
Welborn said he has recently seen sellers offer credits of as much as $25,000 to cover repairs and closing costs, and that they’re also offering to pay for 2-1 mortgage-rate buydowns and warranties on household appliances.
There were four metros in which concessions were less common compared with a year ago. In Austin, Texas, sellers gave concessions to buyers in 33.3 percent of home sales, down from 38.1 percent a year earlier (-4.8 percent). Next came Philadelphia (-2.7 percent), New York (-2.4 percent) and Chicago (-1.6 percent).
Concessions most common in San Diego
In San Diego, sellers gave concessions to buyers in 73 percent of home sales in the fourth quarter, the highest share among the metros Redfin analyzed. San Diego also had the highest share a year ago. Next came Phoenix (62.9 percent), Portland, Ore. (61.6 percent), Las Vegas (61.3 percent) and Denver (58.4 percent).
In New York, sellers gave concessions to buyers in 13.4 percent of home sales—the lowest share among the metros Redfin analyzed. It was followed by San Jose, Calif. (14.4 percent), Boston (17.5 percent), Philadelphia (22 percent) and Austin (33.3 percent).