Cancellations of home-purchase contracts are most common in places that were hot buyer’s markets, such as Atlanta, Fort Worth, and Jacksonville, Florida, according to a new report by real estate brokerage Redfin.
In each of those locations, Redfin noted that roughly 18% of all home-sale agreements that went under contract in May fell through. Nationwide, Redfin said that the portion of buyers backing out of contracts is smaller.
It said that 13.6% of May’s home-sale agreements fell through, which is unchanged from a month earlier on a seasonally adjusted basis, and it’s the fourth straight month that contract cancellations have held steady at the same rate.
Redfin noted that the share of U.S. homebuying deals that have fallen through has remained stable over the last two years, ranging between 13.4% and 14%.
It said that the fact that contract cancellations have steadied in the U.S. suggests that while affordability challenges continue to sideline some buyers, others have adjusted to higher mortgage rates.
Redfin noted that the weekly average rate has been over 6% for nearly four years, since late 2022.
Realistic Expectations
Cancellations have come down from their 2023 peak as buyers and sellers enter transactions with more realistic expectations, Redfin said. More sellers have come to terms with the fact that it’s a buyer’s market in most of the country, Redfin said, and many of them are pricing lower from the start.
Some are willing to lower their asking price to attract buyers, and some are willing to negotiate to keep deals together, Redfin said. Buyers have generally become more accustomed to high housing payments, the brokerage said.
According to Redfin, deals are falling apart at a higher rate than they were in 2020-2022, when the nation was in a hot seller’s market. That’s because there are hundreds of thousands more home sellers than buyers, giving buyers the option to back out if they find a home they like better, Redfin noted.
It said that house hunters are also sometimes changing their minds because of financial instability caused by geopolitical turmoil, such as the Iran war, and economic uncertainty, like inflation risk and lack of job security.
Redfin noted that deals are falling apart at a higher rate in certain parts of the nation. They’re most prevalent in Atlanta and parts of Florida and Texas, as those locales complete their one-eighty from pandemic homebuying hotspots to the strongest buyer’s markets in the nation, Redfin said.
In Atlanta, 18.8% of home-purchase agreements were canceled in May, the highest share among the 50 most populous U.S. metros with sufficient data, Redfin said. It was followed by four other southern metros: Fort Worth, Texas (18.1%), Jacksonville, Florida (17.9%), San Antonio, Texas (17.8%), and Orlando, Florida (17.7%).
Market Leans Toward Buyers
Notably,Texas was home to four of the 10 places where contract cancellations were most common, and Florida was home to three.
“Sellers need to pay attention and price realistically, because the market is leaning toward buyers,” said Connie Durnal, a Redfin Premier agent in Dallas. “I recently worked with smart sellers who knew how to get their home under contract and get the deal done: They had paid $400,000 for the home, but they listed at $390,000 because that’s where the market was. They were willing to consider offers under the list price and negotiate with buyers, too.”
In Atlanta, meanwhile, there are 70% more home sellers than buyers, giving buyers the upper hand and the mindset that if they back out of one deal, they’re sure to find another. In Fort Worth, there are 61% more home sellers than buyers, and in Jacksonville, the seller surplus is 74%, Redfin noted.
In both San Antonio and Houston, there are more than twice as many sellers as buyers.
San Francisco Has Fewer Cancellations
Contract cancellations are least common in San Francisco, California, where 3.9% of deals fell through in May. San Francisco’s housing market is booming, largely because of the AI boom, Redfin said.
Next come Nassau County, New York (3.9%), New York City (6.7%), San Jose, California (7.1%), and Montgomery County, Pennsylvania (7.3%).
Redfin noted that cancellations increased month over month on a seasonally adjusted basis in most of the metros in this analysis. The biggest uptick was in Portland, Oregon, where Redfin noted 16.3% of home-purchase agreements were called off in May, up from 14.3% a month earlier.
Next comes Oakland, California, where 10.2% of agreements were canceled, up from 8.2%. Houston (16.9%, up from 15%), Sacramento, California (15.1%, up from 13.2%), and Pittsburgh (15.1%, up from 13.9%) round out the top five.
Contract cancellations decreased most in Columbus, Ohio, where 15.1% of deals were called off in May, down from 17.2% a month earlier, Redfin said. Next was another Ohio metro, Cleveland (15.1%, down from 16.5%). Miami, West Palm Beach, Florida, and San Antonio followed, Redfin noted.
