Higher mortgage rates spur record number of concessions

Rising mortgage rates and high home prices forced a record number of sellers to make concessions in the three-month period ended Feb. 28, Redfin said.

In 45.5% of transactions conducted by Redfin's buyer agents the seller offered some form of remuneration back to the purchaser, the most in any three-month period since the real estate brokerage began tracking this data in June 2020. For the same period last year, 31.1% of sales involved some sort of action by the seller to get the deal done, other than a price cut.

That includes covering the transaction's closing costs, funding a mortgage rate buydown for the purchaser and/or paying for repairs. 

Mortgage rates rose to 6.73% last week, according to Freddie Mac. But because of the impact the failures of Silicon Valley Bank and Signature Bank had on the benchmark 10-year Treasury yield, the 30-year fixed rate loan is expected to be priced lower when the next survey is released on March 16.

Price reductions are not considered a form of seller concession in this report; however these are also continuing at a record pace, Redfin said. It found 25.2% of sales during the three-month period had both a concession and a lower final sales price than its original listing amount.

Listing price cuts prior to sale and a concession were found in 20.6% of the cases, while all three phenomena were seen in 13% of the transactions.

Buyers are willing to wait for what they consider to be the "perfect house," said Elena Fleck, a Redfin agent in Palm Beach, Florida, in a press release.

"Now, a home that's not perfect may stay on the market for three to four months if the seller doesn't throw in something to sweeten the deal," Fleck added. "Any home with a roof that's over eight years old is just sitting — buyers don't want to put any additional funds into repairs."

So sellers are offering credits to pay for a new roof, while buyers are not being shy about asking for help with closing costs, Fleck said.

There's a wide divergence in the use of concessions in the 22 metro areas specifically studied by Redfin. Las Vegas had the largest share of seller accommodations offered at 77.4%, followed by San Diego, 74.8% and Sacramento, California at 70.9%.

At the other end of the spectrum, sellers offered concessions in just 16.7% of New York sales. Next was San Jose, California, 21%, and Boston, 23.1%.

The growing additional costs of owning a home are another reason why the buyers might need to be goosed into a transaction. Beyond the mortgage payment, the average homeowner spends $17,459 annually on additional items involved with their property, including $4,283 on maintenance and $3,890 on home improvements, a Clever Real Estate/Real Estate Witch study found.

More than 90% of homeowners stated those costs are higher than they expected, Clever claimed.

Over half of the respondents, 57%, said they would have approached buying differently if the actual costs involved were known.

That includes one-third who said they would have negotiated a better price or tried to get a concession from the seller. A 42% share stated they would have bought a home that required less maintenance.

The 20-question survey involved 1,000 homeowners and was conducted on Feb. 2.