The number of home sale cancellations in July rose to a two-year high as buyers retreated from the market amid rising mortgage rates and rising prices.
About 63,000 home purchase agreements were canceled in July, equal to 16% of homes contracted that month, according to a new analysis by Redfin. That’s up from 15% of deals that collapsed in June and is the highest in more than two years.
By comparison, just a year ago, the housing cancellation level was around 12.5%.
There are two reasons for the increase in cancellations. Homes stay on the market longer, giving buyers more power to claim repairs, liens, and other contingencies. If sellers say no, buyers are more likely to back off and move forward “because they are confident they can find something better,” says Heather Croy, a Redfin real estate agent based in Jacksonville, Florida.
Homebuyers are also concerned about an increasingly bleak economic outlook as the Federal Reserve moves to tighten prices at the fastest pace in decades, Risking a Possible Recession.
“Buyers are also volatile because they fear a possible recession will cause home prices to fall,” Croayi said. “They don’t want to end up in a situation where they buy a house, and it’s worth $200,000 less in two years, so some are choosing to wait in the hope of buying when prices drop.”
Jacksonville, Florida, had the highest percentage of home cancellations in the 93 metropolitan areas analyzed by Redfin, with 800 home purchase agreements canceled last month — or about 29.3% of the city’s contracted out homes. It was followed by Las Vegas and Lakeland, Florida, with 27% and 26%, respectively.
Six cities in Florida ranked among the cities with the highest rate of home purchase cancellations. Florida exploded in popularity during the COVID-19 pandemic and experienced the highest price growth in the country. This has slowed competition, which means buyers negotiate – and back off if sellers don’t give them what they want.
The data comes a day after the release of the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the single-family pulse. housing marketAnd the It fell for the eighth straight month to 49, marking the worst stretch for the housing market since the 2008 financial crisis.
Any reading above 50 is considered positive; The gauge has not entered negative territory since a short – but sharp – decline in May 2020.
The interest rate-sensitive housing market has begun to cool off significantly in recent months as feed it Moves to tighten policy at the fastest pace in three decades. Policy makers have already agreed to increase the interest rate by 75 basis points in June and July.
Average fixed price for 30 years Mortgage It rose to 5.22% for the week ending August 11, according to recent data from mortgage lender Freddie Mac. This is much higher than it was just a year ago when rates were 2.86%.
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