Canceled Contracts on the Rise

SEATTLE – (By Dale King, Realty News Report) — Nearly 56,000 home-purchase agreements were canceled during June — equal to 14.9 percent of all dwellings that went under contract just before or during the first month of the summer season. It was the largest percentage of last-minute withdrawals by potential purchasers during any June on record, says data contained in a newly released report from Seattle-based real estate brokerage Redfin.

“Buyers are getting more and more selective,” said Julie Zubiate, a Redfin Premier agent in the San Francisco Bay Area. “They’re backing out due to minor issues because the monthly costs associated with buying a home today are just too high to rationalize not getting everything on their must-have list.”

Redfin’s research found that some house hunters have trouble sticking to their commitment to buy because homes are more expensive than ever. The median home sale price rose 4 percent year-over-year to a record $442,525 in June, and the average interest rate on a 30-year mortgage was 6.92 percent. While that’s down slightly from 7.06 percent the month before, it’s still more than double the all-time low rate that put smiles on buyers’ faces during the bargain basement mortgage rate days of the pandemic.

Things were particularly tough in Orlando, where some 900 home-purchase agreements were terminated in June, equal to 20.8 percent of homes that went under contract that month—the highest percentage among the 50 most populated metro areas in the U.S. Next came Jacksonville (20.5 percent), Tampa (20.5 percent), Las Vegas (20.2 percent) and San Antonio (19.9 percent).

“We’re seeing nightmare scenarios where deals are getting canceled at the last minute for the most minute reasons,” said Rafael Corrales, a Redfin Premier agent in Miami where roughly 2,500 home purchases got dumped in June—equal to 17.6 percent of homes that went under contract.

“Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue,” said Corrales. “I don’t want my buyers to be surprised by all of the expenses that come with owning a home in Florida, so I advise them to proactively research the hefty costs of insurance, property taxes and HOA fees, in addition to the cost of their mortgage payment.”

The sizable number of retreats by would-be home buyers wasn’t the only dubious circumstance notched by the real estate market during June, says the Redfin analysis. Nearly one in five (19.8 percent) homes sold that month was bought only after a price cut, resulting in the highest level of rate-reduced residences sold during any June on record. That’s up from 14.4 percent a year earlier and is just shy of the 21.7 percent record high set in October 2022.

In addition, home sales fell 0.5 percent month over month in June on a seasonally adjusted basis. While that may seem like a tiny drop, it’s actually the largest decline since October 2023. Home sales decreased 1.1 percent from a year earlier and were 21.5 percent below pre-pandemic (June 2019) levels.

Redfin’s assessment says sales have been sluggish of late because many Americans can’t afford to buy a home. While mortgage rates ticked down in June (and have fallen even further since), some buyers are waiting on the sidelines hoping that they’ll drop even more.

But those buyers may be waiting in vain, said Redfin Economics Research Lead Chen Zhao, who said rates are unlikely to fall much in the next few months, and markets have already priced in a September rate cut.

Highlights from the June 2024 Redfin report:

Prices: Median sale prices rose most from a year earlier in Anaheim, Calif. (13.2 percent), Newark (12.6 percent) and Nassau County, N.Y. (12 percent). They fell in four metros — all of them in Texas: Austin (-5.5 percent), Dallas (-1.6 percent), San Antonio (-1.3 percent) and Fort Worth (-0.2 percent).
Price cuts: In Indianapolis, 49.2 percent of listings had a price drop—a higher share than any other metro Redfin analyzed. Next came Denver (46.6 percent) and Tampa (43 percent). The lowest shares were in Newark (15.2 percent), Chicago (16.3 percent) and Milwaukee (17 percent).
Active listings: Active listings rose most in three Florida metros — Tampa (47 percent), Fort Lauderdale (45.3 percent) and Orlando (41.4 percent). They fell most in Chicago (-7.4 percent), New Brunswick, N.J. (-7 percent), Chicago (-7.3 percent) and New York (-5.8 percent).

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