Homebuyers are backing out of sales agreements at the highest rate since the COVID-19 pandemic started because of a market that has moderated and given more opportunity for negotiation; nonetheless, some deals are falling through because rising mortgage rates are making properties out of reach for buyers.
According to a recent Redfin estimate, almost 60,000 contracts for the purchase of homes were canceled in June, accounting for 14.9% of the residences that were put under contract during that time. Only March and April 2020, when the COVID-19 epidemic initially destabilized the housing market and the overall U.S. economy, have seen higher shares of canceled sales than this one. 17.6% and 16.4% of home purchase agreements fell through in those months, respectively.
In a press release, Taylor Marr, the deputy chief economist at Redfin, stated:
“The slowdown in housing-market competition is giving homebuyers room to negotiate, which is one reason more of them are backing out of deals. Buyers are increasingly keeping rather than waiving inspection and appraisal contingencies. That gives them the flexibility to call the deal off if issues arise during the homebuying process.”
“Rising mortgage rates are also forcing some buyers to cancel home purchases. If rates were at 5% when you made an offer, but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home or you may no longer qualify for a loan,” Marr added.