Cancelled Sales vs. Stockpiling Inventory 

According to a new Redfin analysis, just over 41,000 home-purchase agreements in the United States fell through in January, or 14.3% of all homes that went under contract during that month. This is the highest cancellation rate for this time of year since at least 2017, up from 13.4% a year earlier.

• Supply is rising and demand is falling. Homebuyers now have more options because the housing inventory has increased to its greatest level since 2020. Meanwhile, pending house sales dropped to their lowest point since January (except from the beginning of the epidemic). Because there is more supply than demand, the housing market is skewed in favor of buyers, and some prospective homeowners withdraw during the inspection phase because they have found a better home—or at least the prospect of one.
• Economic uncertainty. Due to the general economic and political unpredictability, Redfin agents say that some transactions are failing because buyers (and occasionally sellers) are changing their minds. A sense of insecurity is exacerbated by government policy changes, tariffs, and layoffs. Some are opting to remain in their current location.
• Sticker shock. With the median U.S. house-sale price increasing 4.1% and the average mortgage rate in January reaching 6.96%, an eight-month high (weekly average rates have since dropped to 6.76%), both mortgage rates and home prices are still stubbornly high. Some prospective buyers are changing their minds due to rising house costs and economic uncertainties.

“I’m seeing more homebuyers back out of deals than usual, and I’m hearing the same from other agents and mortgage lenders in the area,” said Sam Brinton, a Redfin agent in Salt Lake City, UT. “Some buyers are getting cold feet with everything going on in the world. But even with more cancellations, there are also more buyers out there in general. The nice homes in desirable locations are selling quickly, and those buyers are less likely to cancel.”

Some Redfin realtors are encouraging buyers to keep a careful eye on homes they want to buy, even if they lost a bidding war for it, because a good number of sales are falling through.

“It’s worth checking in with the listing agent about a week after the house goes under contract,” said Alison Williams, a Sacramento Redfin Premier agent. “Twice since the start of the year, I’ve found out the original buyer canceled the contract, and my clients were able to get their offers accepted before the home went back on the market.”

Although the percentage of home-purchase agreements being canceled is more than average for the beginning of the year, it is still less than the cancellation spikes Redfin observed in late 2022 and at the beginning of the pandemic. In March 2020, a record 16.4% of transactions were canceled as many purchasers were put off by the start of the pandemic. In October 2022, when mortgage rates surged above 7% for the first time in two decades, almost as many transactions were canceled. This change excluded many homebuyers and allowed those who stayed more flexibility to back out of agreements if a house wasn’t ideal.

Top 5 Metros w/ the Highest Share of Deals Falling Through

With one in five (19.8%) of the pending house transactions in January canceled, the popular Atlanta metro leads the country in canceled deals. The next most canceled deals were in Orlando (18.2%), Las Vegas (17.9%), Houston (17.8%), and Jacksonville, Florida (17.8%).

Florida is home to two of the top five major metro areas in terms of the percentage of canceled deals. The rising frequency of natural disasters and rising home insurance and HOA dues are dampening the Sunshine State’s property market.

However, because there is so much inventory available—in fact, there are more properties for sale in Florida than ever before—some purchasers are pulling out of transactions. In other areas of the state, Redfin agents claim that increased availability gives buyers the freedom to be picky: If a problem arises during the inspection phase, some buyers are pulling out because they know they can move on to another house without that problem.

The Bay Area has the lowest rate of home-purchase agreement cancellations. With 4.1% of agreements closing, San Francisco has the lowest share, followed by San Jose, CA (5.9%). Seattle (8.7%), Oakland, CA (8.4%), and Nassau County, NY (6.8%%) complete the top five. Because there is a limited supply on the market and all of those markets are currently leaning favor sellers, buyers usually have few options if they back out of a contract.

LA Home Purchase Cancellations Hit Highest January Level Since 2017 Due to Wildfires

The largest increase among the major U.S. metro areas is Detroit, where 17.4% of home-purchase agreements are going out of contract, up from 13.1% a year ago. Next are Los Angeles (15.9%, up from 13.2%), New Brunswick, NJ (11.8%, up from 9.1%), Virginia Beach (15.2%, up from 12.1%), and Atlanta (19.8%, up from 16.6%).

The proportion of pending transactions in Los Angeles that fell through reached its highest January level in eight years. That’s probably due to the terrible Palisades and Eaton wildfires, which severely affected daily life for many in Southern California and destroyed thousands of houses in the Los Angeles area.

As a percentage of all pending transactions, home-purchase cancellations increased in 37 of the 50 most populated metro areas.

The biggest declines were in:

1. Fort Worth, TX (16.2%, down from 18%)
2. Fort Lauderdale, FL (17.2%, down from 18.6%)
3. Philadelphia (11.8%, down from 13.2%)
4. Cleveland (16%, down from 17.1%)
5. Columbus, Ohio (14.1%, down from 15.1%)

To read the full report, including more data, charts, and methodology, click here.