Rise In Seller Concessions: Pandemic-era Boomtowns Witnessing Growing Trend

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Rise In Seller Concessions: Pandemic-era Boomtowns Witnessing Growing Trend

Jun 5, 2023 | News | 0 comments

In the three months leading up to April 30, 2023, an increasing number of home sellers are offering concessions to attract buyers. Approximately 42.9% of homebuyers are now receiving freebies, a significant rise from 25.5% compared to the previous year. However, there has been a slight decrease of 2.7% since February, when an all-time high of 45.6% of buyers received concessions.

A recent report by Redfin reveals that the percentage of home sellers offering concessions, such as cash incentives, discounts for repairs, closing cost assistance, and mortgage-rate buydowns, has decreased primarily due to seasonal factors. During the early spring, when more buyers tend to enter the market, sellers gain greater leverage, resulting in a decline in the prevalence of concessions.

Nevertheless, in contrast to the previous two years, concessions have seen an increase this year, as sellers in slowing real estate markets are compelled to adopt additional strategies to attract buyers due to high mortgage rates. The rate at which sellers are offering concessions decreased by 6% from February to April, a much smaller decline compared to the 18% drops observed during the same period in 2021 and 2022. This smaller decline in concessions aligns with reduced competition among homebuyers, as revealed by Redfin agents, with only 46% of offers facing bidding wars in April, down from 59% during the same month the previous year.

However, there are still certain markets where buyers hold the advantage, as they remain highly active. In some areas, the scarcity of available inventory further contributes to the absence of concessions for buyers, as increased competition and bidding wars are prevalent factors.

According to Shauna Pendleton, a Redfin agent in Boise, Idaho, the housing market has been disrupted by high mortgage rates and limited supply, leading to varying negotiations for each deal. Some buyers are making extensive demands while offering below the asking price, while others are highly motivated and forgo extras to secure a home. However, a consistent trend is the provision of concessions by homebuilders. Builders are expediting property sales by offering concessions equivalent to approximately 3% of the sale price, which they credit to buyers at closing. Buyers are utilizing the additional funds to cover closing costs or reduce their mortgage rates.