Canceled home sales surge as fed-up buyers and sellers walk away

Yahoo

7 days ago

As homebuyers and sellers remain locked in a standoff, more and more are deciding it's easiest to just walk away when negotiations falter in today's stuck-in-place housing market.
Buyers, many of whom are struggling to afford record-high home prices but feeling emboldened by having more inventory to choose from, are proving increasingly willing to end contract negotiations when they disagree with sellers over things like presale repairs.
Read more: Why are home prices so high right now?
A portion of sellers, meanwhile, have hefty equity positions and low mortgage rates that leave them in no rush to move. When contract negotiations hit roadblocks or they can't get the price they want, many sellers simply pull their homes off the market.
These impasses have driven canceled deals and pulled listings to their highest levels in years, helping to keep home sales muted this spring. Sales of existing homes slumped to a seasonally adjusted average annual rate of 3.93 million in June, new National Association of Realtors data shows, a nine-month low in what's typically the housing market's busiest season.
Last month, 57,000 deals — 15% of all homes that went under contract — fell through, the highest share of canceled deals in June going back to 2017, according to Redfin. The brokerage cited factors like financially stretched buyers and ongoing economic uncertainty for the spike.
Delistings, where sellers take their homes off the market without a sale, are also on the rise. They jumped 47% in May from a year ago, outpacing recent inventory gains, according to Realtor.com. This move suggests that many sellers would rather stay put than adjust to current market dynamics.
Repair face-offs
In Louisville, Ky., Realtor Bob Sokoler has seen more deals fall apart as those sellers who can 'afford to wait it out' butt heads with leery buyers stretched thin by high prices and mortgage rates near 7%.
'There are a lot of unrealistic expectations,' Sokoler said. Recently, he's struggling to save a sale that stalled in contract negotiations over roof repairs. After his sellers cut their price and accepted an offer of $315,000 on their home, the buyers said they'd need a new roof to close the deal.
When an inspection revealed a few popped nails — a minor repair — on a roof with seven to 10 years of life left, the sellers said no. Neither side wants to budge. Without a new roof, the buyers are threatening to walk away, but the sellers' final offer is a $1,000 credit for fixes, far from the $10,000 or more a replacement typically costs.
'We're stuck in a quandary here,' Sokoler said.
The jump in scuttled deals reflects a clear difference between two types of sellers in today's market, said Danielle Hale, chief economist at Realtor.com. One group is highly motivated to move and willing to make price cuts and other buyer concessions to secure a sale. But the other is comprised of holdouts who are able to wait if market prices don't meet their expectations.
'Both positions are reasonable,' Hale said. 'It just depends on your personal situation, what you need from your housing situation, and what's driving your motivation to move.'
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While the spike in delistings is significant, more sellers are proving willing to make price cuts to get a deal done than exit the market altogether. Even at today's higher levels, delistings make up a single-digit percentage of active inventory. Price cuts are much more common, with more than 20% of listings taking one in June.
Read more: Ask a real estate agent — Is the housing market less competitive now?
Sunbelt spikes
Canceled deals and delistings tend to be most prominent in parts of the country where buyers have more leverage due to higher inventory levels. In June, Jacksonville, Fla., led the nation in contract cancellations, with 21.4% of deals falling through, according to Redfin data.
Phoenix, Miami, and Riverside, Calif., meanwhile, had the highest levels of delistings relative to new listings in May. In Phoenix, 30 homes are delisted for every 100 new homes that come to market. All three cities also rank in the top 10 nationwide for contract cancellations and saw 18% or more of deals fall out of contract last month.
As more sales fail to reach the finish line, Mark Hiller, a Realtor in Niceville, Fla., is getting pickier about the sellers he's willing to represent. Home prices in Florida's panhandle, where he works, are down around 7% from their early 2022 peak, but the decline was gradual and uneven across different cities and price points. Some sellers still aren't aware and want to test the market by listing at top dollar.
'This isn't the market to do that,' Hiller said. 'I've said no to more listings this year than I have in the past five years.'
He's looking for listings from sellers with strong motivation to move, like service members being deployed from the area's multiple military bases or sellers seeking more space for a growing family or a smaller house after a divorce or a spouse's death.
Even cities that have long had hot housing markets are showing some signs of shifting now.
Craig Harris was prepared for a quick sale when he listed his condominium in Grand Rapids, Mich., in April. Like many Midwestern cities, Grand Rapids has spent years in a seller's market, and he'd previously sold a condo after garnering multiple offers in under 24 hours.
But this time, his unit sat. One prospective buyer expressed early interest but backed out, and a small price reduction garnered a few more showings but no offers. After six weeks, Harris, 32, took it off the market rather than cut the price further. He'd like to relocate to a different neighborhood on the outskirts of Grand Rapids, but doesn't have an immediate need to make the move.
He and his real estate agent are trying to piece together when and why the market turned. Their theories include higher mortgage rates, tariff and economic jitters, and a growing buyer wariness toward condo fees, though his are relatively low at about $200 a month.
'I've kind of just resigned to the fact that I will stay in this condo for as long as it makes sense to, financially and economically,' Harris said. 'Whether that's another year or another three years, I think that's just up to what the market decides.'
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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