Although home sale activity this fall has dropped by 14.1% compared to last year, that doesn’t mean buyers will face less competition. They may be surprised to learn that multiple-offer situations, in fact, are still common.
“Multiple offers are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market,” says Lawrence Yun, chief economist at the National Association of REALTORS®, in response to recent data showing a 4% dip in home sales last month.
Housing shortages have resulted in intense buyer competition for fewer listings. And buyers must act fast because properties are selling quickly: 66% of homes on the market nationwide in October were sold in less than a month, according to NAR data. Listed homes received an average of 2.5 offers.
High Prices, Waived Contingencies
Home prices continue to rise across the country. The median sale price for an existing home in October rose 3.4% compared to a year ago, reaching $391,800, according to NAR data.
Up against multiple offers, home buyers may have to face some heartache before they win out on “the one.” Sixty-two percent of real estate professionals say their first-time home buyers typically had to put in four or more offers before closing on a home, according to Assurance IQ, an insurance provider.
The bidding wars are prompting some buyers to offer more than the list price, too. More than half—58%—of real estate pros say the majority of their clients are putting in offers above the asking price. Agents most often reported clients offering 11% to 24% above asking price. On a median-priced home, that could mean paying $43,000 or more above the asking price.
Further, some home buyers still appear to be making big compromises to get the home they want. Twenty-four percent of buyers waived the inspection contingency in October, and 21% waived the appraisal contingency, according to the latest REALTORS® Confidence Index survey. Nearly 30% of buyers paid cash to better compete, according to NAR’s October data.
More Concessions Coming?
Recent housing reports suggest that some markets may be seeing more seller concessions, particularly as higher mortgage rates and home prices push more buyers out of the market. A new report from Redfin shows that about one-third of U.S. home sales included concessions from home sellers during the three months ending Oct. 31. These concessions include repair credits and mortgage-rate buydowns, particularly among home sellers seeking a quick transaction due to major life events, according to the Redfin report.
Builders have been cutting home prices to woo buyers to the new-home market ever since mortgage rates jumped to the 7% range. In November, 36% of builders reported reducing their home prices, which is up from 32% in the previous two months and the highest percentage since November 2022, according to the National Association of Home Builders. The average price reduction in November was 6%. Home builders also reported offering sales incentives, like free upgrades, though that’s down slightly from 62% in October, the NAHB says.
The builders’ trade group is optimistic that the concessions will attract more buyers to the new-home market in the months ahead. “Combined with sales incentives and a lack of resale inventory, demand has remained solid in 2023 and should improve in 2024 as interest rates move lower,” says NAHB Chief Economist Robert Dietz.