There is a surplus of second thoughts and cold feet in the housing market: Nearly 60,000 home purchase agreements were canceled in August, which is equal to 15.7% of homes that went under contract that month.
According to new data from Redfin (NASDAQ:RDFN), August’s percentage of canceled deals is up from 14.3% one year ago, and it is also the highest percentage since October 2022. The level of terminated transactions comes as mortgage rates remain above the 7% mark and the median home sale price rose 3% year-over-year to $420,846 in August, the largest annual increase since October 2022 and only 2.8% below the May 2022 record high of $432,780.
“Home prices will likely remain elevated for the foreseeable future,” said Redfin Economics Research Lead Chen Zhao. “The Federal Reserve still has more work to do in its battle against inflation, which means mortgage rates are unlikely to come down anytime soon. As long as rates remain high, homeowners will be reluctant to sell. And that lack of homes for sale will keep prices high because it means buyers are duking it out for a limited supply of houses.”
Zhao added that new listings rose by a scant 0.8% from July to August and dropped 14.4% from one year earlier.
“New listings have likely bottomed out,” Zhao said. “Most of the homeowners who feel handcuffed by high rates have already made the decision not to sell. That means many of today’s sellers are putting their homes on the market because they have to, in some cases due to divorce, family emergencies or return-to-office policies.”
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Interesting…~!
Why are the escrows falling out?
The article did not address the WHY in the title? Why are the contracts falling apart? Is it low appraisals vs high contract prices, is it due to inspection issues with sellers thinking buyers will buy anything without repairs or is the article just sticking with their opening line about buyers’ cold feet?
My observation is that Buyers are not qualifying. They go into escrow thinking they qualify. Then the lender tells them they don’t.
This is what you see in a changing market. So hold onto your hat. I predict a wild ride is coming. I also don’t think rates will come down until maybe just before the 2024 election. Maybe.
The interest rates should have gone up in smaller increments beginning in 2018 and we would not be in this predicament with homes that rose in value too high and too fast.
The federal reserves job is to keep inflation in check and they didn’t do their job. Let the housing market run away by having subsidized rates of interest rather than raise the rates and slow inflation.