The U.S. housing market saw a spike of canceled home sales this summer largely in Sun Belt markets, including Dallas-Fort Worth, that saw an influx of buyers during the pandemic.
A new report from Redfin found that 21.5% of pending transactions in the Fort Worth area and 19.7% in the Dallas area fell through in August.
Nationwide, about 64,000 home-purchase agreements, or 15.2%, fell out of contract in August. The percentage has hovered around 15% for about three months — the highest level on record outside of March and April 2020, when COVID-19 fears brought the market to a halt. Before the pandemic, 12% of buyers nationally would typically cancel deals each month.
Buyers in Jacksonville, Fla., Las Vegas and Atlanta were most likely to back out. Places such as the San Francisco Bay Area and New York that saw people leave during the pandemic had the lowest share of deal cancellations.
Sun Belt areas “initially attracted house hunters because they were relatively affordable, but an influx of demand caused prices to skyrocket, rendering them less attractive to many homebuyers,” the Redfin report said.
During last year’s red-hot buying frenzy, buyers found they had to waive certain contract contingencies to compete for a home. Now, with buyers having more of an upper hand, they may have more power to back out.
“Including inspection, financing and appraisal contingencies in a contract means a buyer can cancel their purchase if there’s an issue with the home, they can’t get a mortgage or the appraisal is different from the agreed-upon amount,” the report said. “Some buyers may also be backing out of deals because they’re waiting to see if home prices fall.”
Some buyers may have gotten sticker shock with mortgage rates likely higher than when they toured the home or got pre-approved. The average rate for a 30-year fixed-rate mortgage climbed past 6% in September and sat at 6.29% as of Sept. 22, according to Freddie Mac.
A year ago, the 30-year rate averaged just 2.88%. That means on a $300,000 home loan, monthly payments have jumped from about $1,260 to $1,750 with taxes and insurance, Bankrate estimates show.