Nationwide, roughly 64,000 home-purchase agreements fell through in August, equal to 15.2% of homes that went under contract that month. That’s up from 12.1% a year earlier and is comparable to July’s revised rate of 15.5%, according to a new report from Redfin.
The percentage has now hovered around 15% for the past three months — the highest level on record, with the exception of March and April 2020, when the onset of the coronavirus pandemic brought the housing market to a near standstill. Before the pandemic, it was consistently around 12%.
Homebuyers were most likely to back out of deals in Sun Belt cities that surged in popularity and price during the pandemic, such as Phoenix; Tampa, Fla., and Las Vegas. They were least likely to back out in pricey coastal hubs, like San Francisco and New York, which went out of vogue during the pandemic but are now making a comeback as workers return to the office.
“House hunters today are taking their time and exploring their options, whereas six months ago, they had to act quickly and pull out every stop to compete because homes were selling almost immediately,” said Tzahi Arbeli, a Redfin real estate agent in Las Vegas. “Homebuyers now will agree to buy a house and be doing the inspection, and then back out because they found another home they love more.”
Surging mortgage rates may also be a factor. The average 30-year-fixed mortgage rate hit 6.29% last week — the highest since 2008 — sending the typical homebuyer’s monthly mortgage payment up 45% from a year ago.
“Some homebuyers are finding that by the time they go under contract and lock in their mortgage rates, rates could be much higher than they were when they toured the home and/or got pre-approved,” said Sam Chute, a Redfin real estate agent who works with sellers in Miami. "That can kill the deal, because the buyer is no longer financially comfortable with the purchase. I advise sellers to price their homes competitively based on the current market because deals are falling through and buyers are no longer willing to pay pie-in-the-sky prices.”
In Jacksonville, Fla., roughly 800 home-purchase agreements were called off in August, equal to 26.1% of homes that went under contract that month. That’s the highest percentage among 50 most populous U.S. metropolitan areas. Next came Las Vegas at 23%, Atlanta at 22.6%, and Orlando, Fla. at 21.9%.
