Nearly 40,000 home sale agreements in January, or 13.7% of homes that went under contract, were canceled. According to data from Redfin, that share is up from 13.1% one year before and marked the highest January share in records dating back to 2017.
Redfin attributed the high cancelation rate to a buyer’s market where supply outpaces demand, coupled with financial uncertainty. Indeed, a separate data report released by Redfin found nearly half (49%) of US residents admitted they were struggling to afford their regular rent or mortgage payments.
And while there are more homes on the market, they are not necessarily affordable to many buyers. Redfin noted homebuyers need to earn $111,000 per year to afford the typical home, about $25,000 more than the median household income.
The metro areas with highest sales cancelation rates last month were San Antonio (21.2%), Atlanta (18.5%) and Cleveland (17.9%). Riverside, California (17.5%), and Orlando (17.3%).
“More buyers are backing out,” observed Alin Glogovicean, a Redfin Premier agent in Los Angeles, where 16.7% of home purchase agreements were cancelled in January, up from 15% a year earlier. “They’re second-guessing the wisdom of making a huge purchase when there’s a fear in the back of their mind about the state of the economy and the uncertainty of their finances. That’s particularly true when they’re first-time buyers who don’t have equity from a previous home sale, and they’re using most or all of their savings on a down payment.”
