Nearly 21% of U.S. Listings Cut Price in September, a Record for the Month

How many homes had price cuts in September?

National Mortgage News reported that nearly 21% of U.S. listings received a price cut in September. That is about one in five homes for sale, and it is the highest share ever recorded for a September.

The same report noted that inventory, meaning the number of homes on the market, grew by more than 5%. The source does not say what period that growth is measured over, so treat it as a general sign that buyers have a bit more to choose from.

It is worth being precise about the record. It is a September record, not necessarily the highest share for any month of the year.

Why do more price cuts matter to home buyers?

A price cut means a seller has lowered the asking price, often because the home has not sold at the original number. When many listings are cut at once and more homes are available, buyers may have a little more room to negotiate than they did when choices were scarce.

That does not mean every home is a bargain. Price cuts vary by area and by property, and the report gives only a national picture. It is simply a signal that sellers in many places are adjusting their expectations.

What is a mortgage rate buydown?

A buydown is a way of lowering the interest rate on a mortgage by paying money upfront. A temporary buydown lowers the rate for a set period and then it returns to the regular rate. A permanent buydown lowers the rate for the life of the loan.

The money for a buydown can come from different places. In the scenario described by National Mortgage News, a seller concession (money the seller agrees to put toward the buyer's costs) could be used for a buydown instead of a further price reduction.

• Temporary buydown: a lower rate for a limited time.
• Permanent buydown: a lower rate for the whole loan.
• Seller concession: money from the seller that helps with the buyer's costs.

Is a buydown better than another price cut?

The source argues that, at today's 7%+ rates, the monthly payment is often a tighter limit for buyers than the price of the house. Because of that, a concession spent on a rate buydown can sometimes improve the payment by much more than the same money spent on a lower price.

Here is a simple example using the $10,000 figure from the report. Assume a 30-year fixed-rate loan at 7%, and assume the buyer borrows the full amount of that reduction. Taking $10,000 off the price lowers the principal and interest payment by about $67 a month, which is roughly $800 over a year. That is a real saving, but it is a modest one.

The report says a buydown can produce a much larger immediate improvement. The source does not give what a buydown costs or how far it would lower the rate, so the actual comparison depends on the lender's pricing and the loan terms. The only way to know is to ask for both scenarios in writing and compare the monthly payments.

What should buyers and agents take from this?

The original piece was written for loan officers. It suggests looking at listings that have had recent price reductions and have been on the market a long time, then offering the listing agent or a prospective buyer a seller-buydown scenario. The idea is that this is more specific and useful than a generic message that rates are high.

For a buyer, the practical point is that price is not the only lever in a negotiation. If a home has been cut and has sat for a while, it may be worth asking a lender to show what the payment looks like under a few structures:

A lower price with the regular rate.

The same price with a temporary buydown.

The same price with a permanent buydown.

Comparing the monthly payment, the total upfront cost and how long any rate reduction lasts can make the trade-offs easier to see. Whether a seller agrees to any concession depends on the seller and the local market.

• Ask how long the home has been listed and whether the price has already dropped.
• Ask a lender to price a buydown and a price reduction side by side.
• Check whether a temporary rate reduction ends and what the payment becomes afterward.