How much can I afford, when buying a house in California? That's the million-dollar question…
Talk about timely news. Three weeks ago, we published an article to address the question: Should a Bay Area home buyer ask the seller to pay some of their closing costs?
Now, a new report from The Mercury News showed that Bay Area home sellers are starting to make more concessions to attract buyers. Some are even offering to pay a portion of the buyer’s closing costs.
Bay Area Sellers Offering Concessions to Buyers
For the first time in many months, the Bay Area housing market is staring to shift in a more buyer-friendly direction. The latest evidence comes from a report published this week by The Mercury News.
According to that report (and anecdotal reports from local agents), some Bay Area sellers are now offering closing cost contributions and other “concessions” to attract home buyers. That’s quite a switch from just a year ago, when seller concessions were practically unheard of in the San Francisco Bay Area.
According to the August 3rd Mercury News report:
[Sellers are] chipping in to help pay closing costs and even to buy points to lower mortgage rates — all to convince increasingly reluctant buyers that the time is right to purchase a home.
This is good news for anyone planning to buy a house in the Bay Area during the fall or winter of 2022, and also into 2023. Going forward, these seller concessions could help many buyers minimize the upfront costs associated with a purchase. And that’s a big deal in a pricey real estate market like ours.
What Is a ‘Seller Concession’ Exactly?
In a real estate and home-buying context, a seller concession occurs when a homeowner offers to cover some of the buyer’s expenses. They’re also referred to as “seller contributions,” and the two terms are often used interchangeably.
Seller concessions can vary, but they’re usually applied to the buyer’s closing costs. As mentioned in the above quote, a homeowner might also contribute money toward “discount points” to help the buyer get a lower mortgage rate.
Sellers offer concessions in order to attract more offers from buyers. These contributions tend to be more common in times when the real estate market slows down — and less common when the market heats up.
That’s why we’re starting to see more of these seller concessions in the Bay Area. The local real estate market has cooled down a bit (relatively speaking) from the frenzied pace we saw during 2021. Homeowners planning to sell might read about the increase in inventory, and the general slowdown in the market, and realize they have to do more to generate offers.
The bottom line here is that the market is changing, on both the supply and demand side. This is giving Bay Area home buyers a bit more leverage — something they haven’t had for a couple of years.
A More Buyer-Friendly Housing Market
This is the latest sign that the Bay Area housing market is cooling down in 2022, a trend that could stretch into 2023. It also brings good news for local home buyers, many of whom have been frustrated by a highly competitive market and rising prices.
There are several reasons for this turning of the tide:
- More homes have been coming onto the market lately, shifting the supply-and-demand situation in a way that benefits buyers.
- Higher home prices and mortgage rates have reduced buyer demand, cooling the real estate market from the frenzied pace of last year.
- Both of these factors have caused sellers to be more flexible, when it comes to pricing and negotiations.
Through the rest of 2022 and into 2023, Bay Area buyers might be able to capitalize on a cooling real estate market. In addition to a potential increase in seller concessions, home buyers should have more properties to choose from later this year and into 2023.
A changing supply-and-demand dynamic could also slow down the overall pace of the housing market, giving buyers a chance to catch their breath. This would be a welcome trend from the fast-paced, bidding-war kind of real estate market we saw during the latter part of 2020 and all throughout 2021.
For all of the reasons mentioned above, it’s still a great time to buy a home in the Bay Area. In fact, the coming months could bring the most buyer-friendly conditions we’ve seen for quite some time.