Good news for buyers in the market for a new home in 2023: As rising mortgage rates, inflation and economic instability have slowed homebuying demand, concessions from sellers (which help to reduce the buyer’s total purchase costs) are starting to rise. In this article, some new and promising data for hopeful homebuyers in the coming year.
By Marino & Marino, P.C. Source: Data from Redfin
Buyers received concessions—such as money for repairs and mortgage-rate buydowns—in a record 42% of home sales in the fourth quarter, up from 31% a year earlier. Pandemic boomtowns including Phoenix and Las Vegas saw among the biggest increases in concessions.
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, which date back to July 2020. That’s up from just over 30% in both the previous quarter and the fourth quarter of 2021, and outpaces the prior 40.8% high from the three months ending July 2020, when the housing market nearly ground to a halt due to the onset of the coronavirus pandemic.
This is according to data submitted by Redfin. A concession is recorded when an agent reports a seller provided something that helped reduce the buyers’ total cost of purchasing the home. That could include money toward repairs, closing costs and/or mortgage-rate buy-downs. It does not include situations in which sellers lowered the listing price of their home.
Concessions have made a comeback as rising mortgage rates, inflation and economic uncertainty have dampened home buying 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,” 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.”
“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.”