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Key Takeaways
- More than 58,000 home purchase agreements were canceled last month, or 15.3% of all homes that went under contract, according to a report from Redfin.
- Deals were most likely to collapse in Texas and Florida, two states that have seen relatively high rates of housing construction.
- Monthly costs—mortgage rates, insurance premiums, property taxes, and other fees—could play a big role in deals falling through.
- Buyers’ reluctance could help push prices lower and reset the housing market, say advisors.
More would-be homebuyers than ever are backing out of their purchase agreements.
More than 58,000 home purchase agreements were canceled in July—equal to 15.3% of all homes that went under contract, according to an analysis from Redfin. That’s the highest July rate since the firm began tracking the data in 2017.
Deals were most likely to collapse in Texas and Florida, the report said. In San Antonio, nearly 22.7% of deals failed to make it to closing last month, followed by Fort Lauderdale (21.3%) and Jacksonville (19.9%). Texas and Florida have seen more new homes built than anywhere else in the country, Redfin said, which means buyers can be pickier—and feel comfortable backing out of a deal should concerns arise.
Buyers could be pulling out when the reality of their monthly costs sets in, according to Bill Shafransky, certified financial planner at Moneco Advisors.
“People are realizing mid-process how expensive this new purchase is actually going to be,” Shafransky said. “It’s bad enough to see how costly your newly anticipated mortgage payment is going to be, but then when you layer in the added cost of homeowners insurance, it pushes a lot of buyers over the edge.”
Why Buyers Backing Out May Be a Good Sign
High mortgage rates and home prices are fueling an affordability crisis. But rising contract cancellations could force home prices lower and reset the market, advisors say.
“In many ways, it shows a healthier dynamic than the recent past—when desperation led people to overpay or waive protections,” said Thomas Ravert, a financial advisor with Pathway Capital who works with first-time and repeat homebuyers. “The market is recalibrating, and while cancellations are frustrating in the short term, they may ultimately lead to more sustainable, long-term homeownership.”
