Sales of previously owned homes have fallen for 10 consecutive months. It's making some home sellers so desperate they're offering buyers cash to purchase their properties.
It all comes down to the Federal Reserve's ongoing fight against surging inflation, which has effectively put an end to pandemic-era mortgage deals. With higher monthly mortgage payments and near-record-high home prices, fewer Americans are purchasing homes. And in a stark contrast to the housing market of 2020, sellers are losing their grip on the US real-estate market — and it's costing them big.
Indeed, data from the real-estate brokerage Redfin indicated that in the fourth quarter of 2022, home sellers gave concessions — such as money for home repairs and mortgage-rate buydowns, a technique where a seller pays a fee at closing to secure a lower mortgage rate for a buyer — to buyers in 41.9% of home sales.
That's the highest rate Redfin has ever recorded over a three-month period.
"Buyers are asking sellers for things that were unheard of during the past few years," Van Welborn, a Redfin real-estate agent based in Phoenix, said in the report. "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."
With fewer deals taking place, home prices are falling in cities across the country — even in previously hot markets like Austin and Phoenix. It's causing some homeowners to do whatever they can to sell their homes quickly.
Buyers are also receiving more price cuts. According to Redfin, a record 22% of home sales Redfin agents made in the fourth quarter of 2022 included both a concession and a final-sale deduction. Additionally, a record 19% included both a concession and a listing-price cut while the home was still on the market, and a record 11% included all three incentives.
Brian Lewis, a housing expert and broker with the real-estate firm Compass, said that in cities like Los Angeles and Chicago a, general lack of homes for sale is also helping shift the market in favor of buyers.
"Here's the thing about America, we don't have inventory," Lewis said in an interview on Fox on Thursday. "In New York City, it's tight. In Richmond, Virginia, it's tight. In some areas of Chicago, it's tight. My Los Angeles offices are saying that it's tight out there, too."
When home prices and mortgage rates are both high, buyers are reluctant to dive in. That means sellers need to compete for the few that are willing to make offers under such conditions. Lewis said these dynamics have made it unmistakable that "homebuyers have way more power" than sellers.
"It took a while, but seller expectations are coming back down to earth," Welborn said. "Sellers realize they're not going to get $80,000 over the asking price like their neighbor did last year."