As Housing Market Continues to Slow, Would-Be Homebuyers Are Increasingly Backing Out of Deals

Redfin, the Seattle-based, technology-powered real estate brokerage firm, is reporting that roughly 63,000 home-purchase agreements fell through nationwide in July, equal to 16.1% of homes that went under contract that month. That is up 15% from one month earlier and 12.5% year-over-year. With the exception of March and April 2020, the onset of the pandemic, the July figure is the highest on record.

Redfin notes that the housing market is slowing as higher mortgage rates sideline many prospective homebuyers. With competition declining, the house hunters who are still in the market are enjoying newfound bargaining power—a stark contrast from last year, when they often had to pull out every stop in order to win.

Today’s buyers are more likely to utilize contract contingencies that allow them to back out without financial penalty if something goes wrong. And with an increasing number of homes to choose from, they’re also more likely to call a deal off if a seller refuses to bring the price down or make requested repairs—a situation that has become increasingly common given that sellers are still adjusting to the cooling market.

Commenting on the report, Redfin’s Deputy Chief Economist Taylor Marr said:

“Home-purchase cancellations may begin to taper off as sellers get used to a slower-paced market. Sellers have already begun to lower their prices after putting their homes on the market. They’ll likely start pricing their properties lower from the get-go and become increasingly open to negotiations.”