Redfin Deputy Chief Economist Taylor Marr joins Yahoo Finance Live to break down a new report that found home sellers are increasingly making concessions to buyers amid the cooling housing market.Video TranscriptDAVE BRIGGS: All right, thank you, Seana. The combination of hot inflation and rising mortgage rates have really frozen the real estate market on both ends. One way to heat things back up, well, sellers are looking to give concessions away. Let’s talk about this phenomenon with Redfin deputy chief economist, Taylor Marr, as part of our real estate report brought to you by Intuit TurboTax. It’s good to see you, Taylor. So let’s talk about these concessions. First, historically speaking, how significant are these concessions, and what types of things are sellers giving away to buyers?TAYLOR MARR: Yeah, thanks for having me on. I really appreciate being here. So what we’ve seen is a huge increase in concessions given to buyers in order to close the deal. Sellers are having a really tough time out there. What we see in Redfin data is that 42% of recent offers had a concession where the seller gave money back to the buyer in some form. And that’s up from about 30% or less historically. So it is a record high, and we’re seeing this really increase. Concessions can amount to $5,000 or $10,000 on average to basically go to fix a roof or pay down a mortgage rate and make it more affordable for the buyer to have that mortgage.DAVE BRIGGS: Are there particular markets where you’re seeing this more so, and where are they?TAYLOR MARR: Yeah, certainly. So the markets that are cooling down the most in reaction to higher interest rates, inflation, and the weaker economy, those are all out in the West Coast. We see in the news a lot of tech layoffs. It’s impacting places like Seattle, San Francisco, Phoenix, San Diego, Vegas. Those are all markets that have seen a big increase in these concessions. And overall, they’re cooling down fast. So these are ways that sellers are trying to now have to lower their price too much.Story continuesSEANA SMITH: Taylor, why are we seeing the opposite go into effect? Cities where we are certainly not seeing this, according to your data– Austin, Philly, New York City, and Chicago. Why do you think that is?TAYLOR MARR: It’s a great question. Concessions are more common when the market is cooling rapidly in ones that are more sensitive, so where we see prices falling the fastest. So these are places, Chicago, New York, Philly, these are also places that have been a bit more resilient. We haven’t seen the market cool down as rapidly. They’ve been more stable.Austin’s a weird exception. I’m not exactly sure why we’re not seeing more concessions. I think one reason might be because sellers are actually aggressively cutting their price, rather than giving it back in the form of concessions. And it had a big boom in equity and real estate prices, so sellers might be just a little bit more willing to cut their price aggressively in Austin.DAVE BRIGGS: I’ve heard of some concessions being made where they are waiving inspection, which this real estate agent urges you not ever to do, no matter how desperate you are. So the question is, are these concessions enough to kind of thaw this frozen market? And that comes down to mortgage rates. What point do you think mortgage rates will get some action going again, and when do you see them leveling out?TAYLOR MARR: That’s an excellent question. Mortgage rates have been the key driver here in both cooling the market and what will be the key factor to bring buyers back in. I think this Redfin data about seller’s concessions actually points to some really good news that buyers are able to get a better deal than might be realized when you first just look at the data of what they can afford. They’re getting significant points paid onto their mortgage to make it more affordable.And what is likely to happen is rates are– we expect in 2023 that rates will continue to decline. In fact, after Friday’s jobs report, we saw a big drop in the bond market, affecting mortgage rates. And so already, we think that’s going to bring some buyers back. And they might be encouraged to know that there’s a lot of homes that are dropping their price out there. They might also be able to get some concession.Now, I did mention these amounts are relatively small, about $5,000 on average. But that could be more advantageous to a buyer than a $5,000 price cut. So buyers are a bit more willing to negotiate in a seller’s concession than they are to accept a lower sale price or get a bargain that way. And so it might actually be worth more both to the buyer and the seller that way. And at the same time, as the market starts to recover a little bit when rates fall, we’ll start to see this moderate out, too.DAVE BRIGGS: And speaking of home prices, Taylor, some have had some very dire predictions about the year ahead, talking about a 20% peak to trough. How significantly do you think the drop will be nationally in home prices in ’23?TAYLOR MARR: So our outlook for 2023 is that home prices will fall about 4% relative to the previous year. That will certainly be sharper in some metros. In Seattle, San Francisco, home values have already fallen more than 10%. And there have been some homes, some segments of the market where values have fallen 20% or 25%.So there’s definitely weakness out there reacting to the market conditions. But overall, nationally, things still aren’t going to be that dire compared to 2008. So our outlook is that even as prices decline, there will still be some affordability challenges for buyers out there. And we’ll be in a tough market for at least the first half of the year.SEANA SMITH: All right, Taylor Marr, great to have you, Redfin deputy chief economist.
As housing markets cool, buyers see ‘huge increase in concessions’: Economist
by admin | Jan 11, 2023 | Commodity | 0 comments