Record-high home prices and elevated mortgage rates are prompting buyers to back out of home purchase agreements at elevated levels.
Redfin’s newest housing market report shows that buyers backed out of 56,000 purchase agreements in June, which constitutes 14.9% of homes that went under contract. That’s the highest percentage of any June on record and the highest level of this year.
But it’s not the highest percentage ever. In March 2020 — the first month of the COVID-19 pandemic — buyers backed out of 16.6% of purchase agreements. This share also breached 16% in October 2022 and October 2023.
“Buyers are getting more and more selective,” Redfin agent Julie Zubiate said in a statement. “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.”
In spite of rapidly rising inventory, high prices and mortgage rates are still keeping buyers at bay. Many are waiting for the Federal Reserve to lower benchmark rates, which it’s expected to do in September.
Housing markets that were hot after the pandemic began had the highest cancellation rates last month as many of those markets have cooled. Of the 50 most populous metro areas, three Florida metros had the highest rates in June — Orlando (20.8%), Jacksonville (20.5%) and Tampa (20.5%). Las Vegas (20.2%) and San Antonio (19.9%) rounded out the top five.
“We’re seeing nightmare scenarios where deals are getting canceled at the last minute for the most minute reasons,” Miami-based Redfin agent Rafael Corrales said. In his market, 17.6% of buyers canceled in June.
“Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue. 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.”
