Housing News

More Than 1 in 5 Homes Have Cut Prices: What Homebuyers Can Negotiate Right Now

Homebuyers hoping to score a better deal this fall may be in luck. More sellers are cutting their asking prices, giving prospective purchasers opportunities to negotiate.

More than 22% of homes for sale had a price reduction in early October, with the average cut coming in at about 4.1%, according to housing market data analyzed by Ryan Schoen, principal analyst at New American Funding (NAF).

This presents opportunities for buyers to negotiate with sellers for money-saving concessions, such as an even lower price, help with closing costs, buying down mortgage rates, and more.

“Once buyers start backing out and foot traffic slows down, active sellers realize they no longer hold all the cards,” wrote Schoen in his latest Weekly Insights report. “They are forced to adapt.”

Home sellers aren’t just lowering prices. Some are pulling their properties off the market as homebuyers reconsider purchases amid elevated mortgage rates.

The result is a market where homebuyers may have more room to negotiate, even as sellers adjust their expectations.

More sellers are lowering their asking prices

More than 104,000 homes recorded a price reduction during the four-week period ending Oct. 11, according to the data cited by Schoen.

The average cut size was approximately 4.1%. On a home originally listed for $400,000, that translates to a $16,400 reduction. It would bring the asking price down to $383,600.

And price cuts aren’t necessarily the only opportunity for savings.

Depending on the market, homebuyers may also be able to negotiate seller concessions, such as help with closing costs, repairs, or a mortgage rate buydown.

A buydown allows a seller or builder to contribute funds toward reducing a homebuyer’s mortgage interest rate. The lower interest rate could be for just the first few years or for the life of the loan, depending on the arrangement.

For financially prepared homebuyers, these incentives could make purchasing a home more affordable.

Why are more home purchases falling through?

Price reductions aren’t the only indication that the market is changing.

About 15.8% of pending home sales were canceled in the latest reporting period, an increase of 2.1 percentage points from a year earlier.

Some transactions fall apart because of mortgage financing, appraisal, or inspection issues. Others may be canceled when homebuyers reconsider their budgets or find another property.

Schoen described cancellations as an early warning sign of changing market conditions.

“Cancellations are a hyper-reactive, high-drama metric,” wrote Schoen. “They happen at the very beginning of the transaction pipeline when a buyer gets cold feet or fails a financial contingency.”

Mortgage rates may be contributing to some of that hesitation.

The average 30-year fixed mortgage rate was approximately 7.33% in mid-October, according to Mortgage News Daily, down from a recent high of 7.61%.

Yet many prospective homebuyers are still hoping for substantially lower rates.

Research from John Burns Research and Consulting found that 48% of surveyed prospective mortgage borrowers identified a rate between 5% and 5.49% as the highest they would accept.

However, homebuyers who focus exclusively on reaching a particular mortgage rate may overlook opportunities to negotiate on price or mortgage incentives.

Some home sellers are choosing not to sell

While some home sellers are reducing prices, others are taking their properties off the market.

Approximately 88,600 homes were recently delisted, according to the data cited by Schoen. The share of listings coming off the market without a sale reached 5.7%.

Schoen characterized delisting as the point when sellers decide they would rather keep their homes than accept lower offers.

The trend appears more pronounced in the South and West, where a larger share of listings were withdrawn than in many Northeastern and Midwestern markets.

Another factor is the mortgage rate lock-in effect, which occurs when homeowners hesitate to sell because they don’t want to give up the low rates on their existing mortgages.

In an August Fannie Mae survey, 61.2% of housing experts expected the lock-in effect to remain a significant constraint on existing-home sales for another three to five years.

But the number of price reductions, signals there may be a growing number of sellers willing to negotiate.

A lower asking price, closing cost assistance, or a mortgage rate buydown could make a meaningful difference in the cost of purchasing a home.