According to a recent report from Redfin (redfin.com), a technology-driven real estate brokerage, 42.9% of U.S. home sales during the three months ending April 30 included concessions offered by home sellers to buyers. This percentage is an increase from 25.5% compared to the same period last year. The figure is slightly below the record-high of 45.6% reached in February.

During the early spring season, the percentage of home sellers offering concessions, such as financial assistance for repairs, closing costs, and mortgage-rate buydowns, typically decreases due to increased buyer activity and competition. However, this year’s decline in concessions was less pronounced compared to the previous two years, primarily because sellers in cooler markets needed to employ additional strategies to attract and secure buyers amid high mortgage rates. In April, the likelihood of sellers providing concessions decreased by 6%, whereas the decline was 18% during the same period in both 2021 and 2022. This reduction in concessions aligns with reduced competition among homebuyers, with 46% of offers encountering bidding wars in April, down from 59% in the previous year.

Sellers are increasingly offering incentives to entice buyers, and several factors contribute to this trend:

1. Buyers hesitate due to rising mortgage rates making homeownership more expensive. A 4% decrease in home prices isn’t enough to counter higher rates, leading to record-high monthly mortgage payments. The limited supply of homes for sale also lowers demand as homeowners hold onto favorable rates.
2. Due to divorce or job relocation, sellers may have an urgent need to sell, increasing their likelihood of offering concessions to facilitate a faster sale.
3. Homebuilders responded to high demand during the pandemic with increased construction. However, rising mortgage rates have driven buyers away, prompting builders to offer incentives like closing cost contributions, gift cards, and free vehicles to sell their inventory.

Although buyers may have an advantage in certain markets, the situation is not universal. In several areas, the scarcity of available homes has created a scenario where homebuyers face stiff competition. In such cases, buyers who engage in bidding wars are unlikely to succeed if they request concessions such as mortgage-rate reductions or assistance with closing costs.