According to a new report from Redfin, more than 42,000 U.S. home-sale agreements fell through in February, equal to 13.7% of homes that went under contract that month.
The online brokerage said that was up from 12.8% the prior year, and was the highest February share in records dating back to 2017. It said that almost one in every seven homebuying deals are falling through mostly because buyers are in the driver’s seat.
“Homes are falling out of contract left and right,” said Juan Castro, a Redfin Premier agent in Orlando, Florida. “Sometimes buyers make an offer but never send the deposit because they get nervous, sometimes they revisit numbers with lenders and don’t feel comfortable with the monthly payments, and other times they use a minor inspection issue as an excuse to back out. I’m also seeing buyers negotiate aggressively—for instance, maybe they ask for a brand-new roof because three shingles are missing on an otherwise perfectly good roof—then cancel the deal if the seller says no.”
Redfin said the analysis is based on MLS pending-sales data.
There are hundreds of thousands more home sellers than buyers in the country, a near-record gap that gives buyers options and negotiating power, Redfin noted. It said that a buyer may back out of a contract during the inspection period if they see a home they like better or an issue comes up that they don’t want to repair. Or, the buyer might just change their mind, confident that there are a lot of other homes on the market that fit their criteria.
Feeling Jittery
House hunters also are feeling jittery because of economic and geopolitical uncertainty, Redfin said. They are concerned about job security, inflation, the Iran war, and other world events that can make their finances feel shaky.
Those factors also are causing mortgage-rate volatility; some buyers who made an offer when rates were near a four-year low in February may have suddenly faced a higher rate when it came time to lock it in.
Redfin noted that contract cancellations are most common in Tampa, San Antonio and other major buyer’s markets.
In Tampa, 18.1% of home-purchase agreements were canceled in February, the highest share of the 47 major U.S. metro areas Redfin said it analyzed. Tampa is followed by four other southern metros: San Antonio (17.9%), Atlanta (17.9%), Jacksonville, Florida (17.5%) and Fort Worth, Texas (17.3%).
All five of those are buyer’s markets. In Tampa, there are 84% more home sellers than buyers, and in San Antonio there are more than twice as many sellers as buyers. Redfin said that allows buyers to back out of one deal and fairly easily move on to the next one.
On the flip side, contract cancellations are least common in the Bay Area.
In San Francisco, 3.7% of deals fell through in February, the lowest share among the metros. Next are Nassau County, New York (4.5%), San Jose, California (5.4%), Milwaukee (7.5%), and Oakland, California (7.7%).
Redfin reported that contract cancellations rose most in Los Angeles, to 15% in February from 12.1% a year earlier. Next was Virginia Beach, Virginia, where 14.7% of contracts were cancelled, up from 11.9%, and Boston (10.8%, up from 8.2%).
