Potential homebuyers are canceling their purchase agreements at a record rate, according to Redfin, which first started tracking this trend in 2017. According to their data, more than 15% of homes that were under contract in July had the home-purchase agreement terminated by the buyer.
Redfin attributes the record high to higher home prices, higher mortgage rates, and economic uncertainty. Buyers have more options and can pull their offer for myriad reasons.
In San Antonio, Texas, 22.7% of people who agreed to buy a home in July ended up canceling their contracts. That’s nearly 1 in 4 deals that fell through. Other cities with high cancellation rates were Fort Lauderdale, Jacksonville, Atlanta and Tampa.
Florida and Texas have seen a large supply of new homes, which gives buyers more options and flexibility. As a result, some buyers feel comfortable canceling deals if they think they can find a better home, according to Redfin.
In Florida, buyers are also walking away due to fears about natural disasters — like hurricanes — and rising costs for home insurance and HOA fees, which make owning a home more expensive.
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Northeastern cities see lowest cancellation rates
In places like Nassau County, New York, and Montgomery County, Pennsylvania, very few homebuyers canceled their purchase agreements — as low as 5.1% in Nassau. These areas had the lowest rates of canceled home deals among the cities Redfin analyzed.
Mortgage rate changes may shift the market
The housing market is undergoing a shift. Mortgage rates are decreasing, which might encourage more buyers to reenter the market.
The Fed is expected to announce a rate cut in mid-September. Chen Zhao, head of economics research at Redfin, said we are already seeing those decreased rates.
“The Fed is widely expected to cut their policy rate on Sept. 17th when they meet,” Zhao told Straight Arrow News. “That rate cut has largely been priced in already. So that means that when they make that cut, rates, mortgage rates, won’t fall any further unless they signal, you know, faster or more rate cuts in the future compared to what markets have priced in.”
“That expectation of these cuts that are coming is what has allowed mortgage rates to drop a little bit already from that. Like, you know, 6.8 range down to about 6 1/2 right now. So it’s not a ton of relief for home buyers,” she added.
At the same time, fewer homes are for sale, which could make buyers feel more pressure to act quickly before options run out. Together, these shifts could lead to more competition and fewer canceled deals.
