Home Sellers Increasing Concessions to Buyers, Nearly Double Last Year’s Rate
A report from Redfin shows that home sellers in the US are increasingly offering concessions to buyers. In the three months ending April 30, 42.9% of home sales included concessions, compared to 25.5% the previous year. The share of sellers providing concessions has slightly decreased from the record-high of 45.6% in February due to typical seasonal trends. However, this spring saw a smaller decline compared to the previous two years, likely because high mortgage rates have made it necessary for sellers in cooler markets to take extra measures to attract buyers. The report also highlights that buyers have the upper hand in some markets. Still, in areas with limited housing supply, buyers may encounter competition, and asking for concessions may result in losing out on a deal.
The increase in concessions is attributed to several factors. Rising mortgage rates have made homeownership more expensive, causing some buyers to put their plans on hold. Additionally, sellers who need to sell quickly, such as those going through a divorce or relocating for a new job, are more likely to provide concessions. Homebuilders also offer freebies to attract buyers and sell off their inventory backlog, including perks like money toward closing costs or even free cars. Despite increasing concessions, sellers also accept less cash for their homes. Around 15.7% of sellers dropped their asking price, and about 20.5% of homes sold had a final sale price below the asking price, often accompanied by concessions. These trends have been most pronounced in Tampa, Nashville, Salt Lake City, Seattle, and Raleigh, where seller concessions have seen significant year-over-year increases. Phoenix, San Diego, Raleigh, Las Vegas, and Denver have the highest shares of sellers providing concessions.
Mortgage Demand at 3-Month Low
Mortgage rates surged last week due to strong economic data, raising concerns that the Federal Reserve won’t lower interest rates in the near future. As a result, mortgage demand dropped to its lowest level since February. The average contract interest rate for 30-year fixed-rate mortgages increased to 6.91%, with points rising to 0.83, causing a decline in mortgage applications.
The lack of housing inventory, rising home prices, and higher mortgage rates are impacting affordability for potential homebuyers. Refinancing applications, sensitive to rate changes, decreased by 7% from the previous week and were 45% lower than last year. Applications for home purchase loans also dropped by 3% for the week and were 31% lower than a year ago. The direction of mortgage rates will largely depend on upcoming economic indicators, such as the government’s monthly employment report.
S&P Case-Shiller: Home Price Declines Possibly Over
Home prices in the US are experiencing a surge due to intense competition and a limited housing supply. In March 2023, national home prices rose by 0.7% compared to the same month in the previous year, according to S&P CoreLogic Case-Shiller Indices. The price increase suggests that the decline in home prices since June 2022 may have ended. However, the 10-city composite showed a year-over-year decrease of 0.8%, and the 20-city composite fell by 1.1%.
Every month, home prices are rising. After seasonal adjustment, prices increased by 0.4% nationally in March compared to February. The 10-city composite rose by 0.6%, and the 20-city composite increased by 0.5%. Regional differences are apparent, with cities in the Southeast, such as Miami, Tampa, and Charlotte, experiencing the highest year-over-year gains. In contrast, cities like Seattle and San Francisco have seen weaker prices in the West. The Southeast remains the strongest region, while the West remains the weakest in terms of home price trends.
Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.