Elon Musk is not alone in trying to back out of a deal. Nearly 15% of pending home sales did not close in June, a new post-pandemic high, according to an analysis of MLS data Redfin released Monday..
Why it matters: This is a sign of how fast the housing market is moving. adjusted for rising mortgage rates which began in March, and marks the beginning of a return to boom sanity, with the balance of power returning to homebuyers. Prices are likely to cool off a bit.
- The sharp rate increases not only slowed down the housing market, but pushed it up against a wall, said Taylor Marr, an economist at Redfin. But he expects the number of cancellations to decline as sellers adjust prices to the new reality.
Zoom out: Typically, most homebuyers sign pending sales agreements with a contingency that allows them to back out of the deal if, for example, the inspection comes back wrong or something isn’t right with the appraisal.
- When the market was booming just a few months ago, many buyers forego those contingencies. those days are over – It is probably the cause of part of the increase in cancellations.
- Deals that don’t close in previously hot metro areas in the Southwest are skyrocketing. In Las Vegas, they were 27%. Several Florida cities are seeing cancellations approaching 25%, including Lakeland, Cape Coral, Jacksonville and Orlando.
nerd out: That 14.9% national rate is perhaps even more remarkable because overall pending home sales fell in June, so we’re seeing a larger percentage of a smaller universe.
In the meantime, Other deals have foundered because fast-moving mortgage rates mean buyers can no longer afford the home they wanted: They didn’t lock in their rate when they signed or were due.
- Those buyers are leaving or, in some cases, loan insurers will no longer approve the mortgage, Marr said.
The new home market You’re Feeling This: Homebuilders are reporting a very different buying picture, with big drops in sales and foot traffic to homes, and an increase in cancellations, according to a June survey of homebuilders from John Burns Real Estate Consulting.
- “Pretty gloomy traffic and sales climate,” says a Phoenix builder quoted in the report. “Cancelations are extremely high.”
A builder in Austin sums it up: “Sales have fallen off the cliff. We are selling 1/3 of what we sold in March and April. Buyers have no urgency and are nervous about interest rates and inflation. The constant negative outlooks being constantly reported in the news don’t help.”
