More than four out of five sellers are offering concessions to offload their homes, well above the portion of a year ago and just off a record high mark from early 2023, Redfin reported.
Approximately 42.9% of homeowners who sold their homes during the three-month period ending April 30 included an incentive, such as funding for repairs, payment of closing costs or mortgage-rate buydowns, the online real estate platform said. The share was more than two-thirds higher in comparison to 25.5% reported a year ago. Three months earlier, a record 45.6% of sellers offered concessions.
The margin of difference between late February and April runs counter to typical yearly patterns, which sees concessions fall more steeply at the start of spring buying season. While this year’s share slipped down 6%, 2021 and 2022’s drops were three times higher at 18%.
But the data largely reflects other recent mortgage lending and housing market reports that show the usual upswing in sales to kick off spring coming in muted. On Thursday, the National Association of Realtors found pending home sales in April flat compared to a month earlier.
“The housing market has struggled to gain momentum during the industry’s crucial spring home-buying season,” said Odeta Kushi, deputy chief economist at First American, in a statement. More than a third of existing home sales transactions historically occur between March and June, she noted.
A primary reason behind the still-elevated level of concessions offered to buyers is the effect of high mortgage rates, Redfin said. The increase in rates over the past year has more than offset a decline in home prices, making it more challenging to sell in many markets.
Redfin also found that seller concessions were offered in addition to lower-than-initial asking prices in over 20% of sales, up nearly threefold from the same February-to-May time frame of 2022.
The homebuilding industry is also influencing the higher share of seller concessions early this year. A surge in building during the pandemic housing boom left many builders with excess inventory of new homes and is leading them to put perks on the table. While statistics for existing homes can see wide regional differences, “the one consistency in the market right now is homebuilders handing out freebies,’ Boise, Idaho-based Redfin agent Shauna Pendleton said in a press release.
“Most builders are offering concessions equal to about 3% of the sale price, which gets credited to buyers at closing, to offload properties,” Pendleton said.
Sellers in markets at the center of home-buying pandemonium during the COVID-19 pandemic now find themselves most likely to offer buyer concessions. In the three-month period ending April 30, over two-thirds, or 68.5% of home sales in Phoenix included concessions, nearly double from 35.9% a year earlier.
San Diego followed Phoenix with a 66.1% share. Raleigh, North Carolina, Las Vegas and Denver rounded out the top five at 64.6%, 59.1% and 58.1%, respectively.
On the opposite end, Boston sellers brought concessions to the table in only 15.9% of transactions, the smallest share among markets measured by Redfin. San Jose, California; New York; Philadelphia and San Antonio were behind at 17.3%, 19.1%, 27.8% and 37.1%.
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