As mortgage rates continue to climb and shelter inflation uncertainties persist, many homebuyers are retreating from the housing market. With affordability challenges mounting, homebuyers are grappling with the harsh realities of diminished purchasing power and escalating costs associated with homeownership.

In response to this unstable market environment, home sellers are turning to concessions as a strategic measure to attract buyers and facilitate transactions. Yahoo Finance's Rebecca Chen breaks down the details, explaining how the need to offer concession marks a "changing tide" in the market.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

RACHELLE AKUFFO: More and more home sellers are offering concessions to sell their homes. Markets across the country are seeing more listings offering perks for buyers. Here to chat more about what's happening is Yahoo Finance's Rebecca Chen. Rebecca, this is quite the turnaround at a point where at one point you couldn't even get a look in when you were trying to get a house. Now the tide seems to be turning. Are buyer's buying it though?

REBECCA CHEN: So that is correct, Rachelle. We are seeing more concessions coming from sellers on the listings. And this is quite interesting because you're right, it seems like there has been a shifting in the market right now. And in January, about 1 in 3 deal transactions has some kind of seller incentives that was offered in them.

And before we really talk about what the concessions were, I want to talk about why sellers feel like they need to offer concessions right now. And the reason is really just because there aren't enough home buyers on the market. A lot of agents are saying that their clients are pulling back because they are leaving the market. They have paused the market for one of the reasons.

And most of them cited that high mortgage rates has been a problem for them. And the second reason, a lot of them is also affordability related, and they just cannot-- a lot of home buyers cannot find homes within their price range. And then the last is a lot of home buyers on the market right now say they cannot compete with all cash bidders. And these are the reasons why over the last six months, a lot of home buyers have really pulled back.

And now we kind of want to talk about what are the concessions that sellers are really offering? And the most common one is really just that a lot of them are offering credits for repair and maintenance. Some of them are offering closing cost assistance. And some of them are even doing a warranty assistance or some kind of rent back from buyers. And these are the offers that Sellers are really throwing into the market right now just helping to close the deal somehow.

And it is quite interesting as you previously mentioned that it seems like the tide has changed a little bit. If you remember just a year or a year and a half ago, sellers didn't have to do anything, and listings were just flying off the shelves. You know, buyers were waiving contingency, they weren't doing appraisals, or they were waiving appraisal contingencies, or they were even just having a fast close just to get that house.

But now, it seems like it's evolving a little bit where sellers actually are trying to entice the home buyers to come back to the market with a little something extra. But it is also worth noting that even with these concessions, we haven't seen demand return to the market. So home buyers, even with all of these extra perks, buyers are still waiting on the sidelines.

RACHELLE AKUFFO: So Rebecca, you mentioned that most buyers are backing out from the housing market because of the high interest rates. Can sellers offer any kind of rate buydown that could help with that cost?

REBECCA CHEN: Yeah. That's a great question, Rachelle. And as we know, the high interest rate is really one of the key elements why buyers are not loving the market right now. And there are some concessions that we are seeing on the market right now, and that is the rate buydown. It's essentially what the sellers can do is add the closing of the deal, they pay some kind of fee that brings down the buyer's loan cost.

We've seen homebuilders do this a lot over the past couple of months to help them make deals. And Toll Brothers, one of the biggest homebuilders in the United States even offer a temporary rate as low as 3.99% on one of their projects. So this has definitely been going on. And it has worked for home builders. And now, it seems like home sellers are catching on.

Agents in the survey we reported on basically say that they expect more sellers to offer this kind of concessions going into the spring buying season if demand just hasn't picked up. I do want to note that yesterday, the Fed did come out and say they do expect some kind of rate cut. Rate cuts are likely sometime this year. Now, we don't know when that will be or how much rate cut that will be. But one thing for certain is that home buyers, they are looking for some kind of relief with interest rates, whether it be coming from the Fed or the home sellers.