What a difference a year makes. Early in 2021, the real estate market was so hot that people got multiple bids on the homes they sold in some cities. Some homes sold above the asking price. Some even sold without inspections. Today, home prices have started to fall. Sellers have begun to be nervous that they did not put their houses on the market last year. Most of the change has been driven by the increase in interest rates, which has taken home mortgage rates from 3% to 6%. (See in which cities home values increased the most since 2000.)
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As the market has softened, homeowners have started to do something they could not imagine in 2021. They have started to offer buyers concessions.
According to Redfin’s new report, A Record Share of Home Sellers Are Giving Concessions to Buyers, 42% of home sellers offered concessions in the fourth quarter. These include money for repairs and special mortgage deals. The number is up from 31% in the same quarter of the prior year. Redfin’s researchers wrote, “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.”
Markets that were the hottest have cooled the fastest. In these markets, prices rose at an unprecedented pace. Prices hit levels that were not sustainable, particularly for someone who needs a 6% mortgage to be a buyer.
The market damaged most by a surge in concessions was Phoenix, where the rate rose to 63% from 33% a year ago. Phoenix is the fastest-growing big city in the United States, which has driven most home purchases. Research, including the S&P Case-Shiller home price index, showed prices rose faster in Phoenix than any other large metro for almost all months in the first half of last year.
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