Realtors panic as buyers pull out of deals at near record levels

Daily Mail​

2 days ago

The US housing market is teetering — and buyers are running for the exits. Spooked by high mortgage rates, mounting insurance premiums, and growing fears of a shaky economy, an astonishing one in seven buyers are bailing at the last minute. In April alone, 56,000 home purchase contracts were canceled — equal to 14.3 percent of all pending deals, according to a new report from Redfin. That's the second-highest April cancellation rate ever recorded, topped only by the early pandemic chaos in 2020.
Reasons for would-be buyers to bail are stacking up fast. A shaky economy and fear of jobs as a result has caused many to get cold feet as they worry they will not be able to cover the monthly payment. Stubbornly-high mortgage rates that hit 7 percent mean those payments are higher than many want to pay. Growing evidence of the house price bubble burst are the icing on the cake for many. They do not want to buy now, only to see property values plummet. The Miami housing market is on a knife-edge as spiraling numbers of homebuyers pull out of deals. It's the latest area in the Sunshine State at risk of a crash.
Desiree Bourgeois (pictured), a Redfin realtor in Detroit, said that at a recent open house, younger buyers were worried about how tariffs, and the economic uncertainty around them, was going to impact the housing market. 'They're hearing the words "tariffs" and "recession," and it's making them nervous that if they buy now, the value of their home will decline, and they don't know whether mortgage rates will go up or down. 'There's a lot of uncertainty out there, with buyers trying to understand how their purchase would fit into their personal finances and the broader economic puzzle.'
Meanwhile, Efosa, CEO of Fire Cash Buyer , said he has pulled out of two contracts recently because he's not optimistic about where the US housing market is headed. Instead, he's waiting for the market to crash, then he plans to buy. 'I'm waiting on the market to cycle as it did in 2008. This is a perfect storm for an eventual market crash due to this affordability crisis,' he says.
'I will be one of the smart ones waiting on the sideline to buy at the right time, not at the top of the market.' Once again, Florida is proving to be a problem. The Sunshine State accounts for five of the ten areas with the highest cancellation rates, including Orlando (19.4 percent), Tampa (19.1 percent), and Miami (18.9 percent).
Other cities hit hard with last minute cancellations include Atlanta, with 20 percent of pending sales falling through, That was followed by Riverside, CA (19.1 percent) and Fort Worth, TX (18.7 percent.) Buyers are also being met with too many choices, which is causing them to back out of deals at the last minute.
Housing inventory is at a five-year high, and some buyers are backing out during inspection in hopes of finding something better. In disaster prone areas like California and Louisiana, skyrocketing insurance premiums are killing deals. 'Some lenders won't sign off if buyers can't insure the home affordably,' Efosa says. But despite many potential buyers ability to seal the deal, savvy house hunters are on alert.
Redfin reports that when deals fall through, there's a window of opportunity for those who are serious about buying. 'Two of my buyers got great homes this way,' said Alison Williams, a Sacramento-based agent. 'When a deal collapses, we jump in before the home even relists.' Williams advises that if a buyer is outbid, they should have their real estate agent submit a backup offer anyway. If the winning bidder backs out, you're up next – likely at a discount.
In the current housing market, sellers are also having to come back to reality on pricing on concessions. It's a buyer's market. 'When buyers pull out, sellers are lowering prices and offering concessions just to seal the deal' Efosa says. While Florida sits atop the cancellation study, the biggest year-over-year jumps in contract fails came from Anaheim, CA (up 3.1 points), Seattle, Milwaukee, and Los Angeles — areas all dealing with too many listings flooding the market.
On the low end, Nassau County, NY had the lowest cancellation rate in the US at 4.8 percent. With the mass cancellations, Efosa says believe a market correction is inevitable. 'It's already happening,' Efosa warned. 'Foreclosures are up. The market will have to come down. The numbers don't lie.' Meanwhile, sellers are panicking about just how much they will have to lower the price of their homes in order to sell.
Over the next year, home prices will drop by 1, according to Redfin, marking the end of more than a decade of almost uninterrupted price hikes. Before and during the pandemic, when there were record-low mortgage rates, buyers would often face bidding wars and lose out on homes. Now, the ball is in their court. The average 30-year fixed mortgage rate was 7 percent on Memorial Day. Redfin predicts rates are likely to hover around 6.8 percent through 2025. Meanwhile, inventory keeps rising. The number of homes on the market has shot up 16.7 percent in just a year — to the highest level in 5 years.