Why is sales going down?
Redfin said several factors contribute to the spikes of failed transactions.
- Increase in supply, Demand declines: Home inventory has risen to its highest level since 2020, giving buyers more options. Meanwhile, pending home sales reached record-breaking records except for the early pandemic month in January. Due to less competition, some buyers back out during the inspection period and want a better deal.
- Economic uncertainty: Buyers, sometimes sellers, are hesitant due to concerns about tariffs, layoffs and federal policy changes. Many people choose to wait for market instability before committing to a purchase.
- High mortgage rates and home prices: The average 30-year fixed mortgage rate in January was 6.96%, a high of eight months. Prices have since dropped to just 6.76%, but home prices remained rising, with median US home prices rising 4.1% year-on-year. The combination of high costs and financial uncertainty has led many buyers to rethink their purchases.
“I’ve seen more home buyers come back from the deal than usual and I’ve heard the same from other agents and mortgage lenders in the area,” said Sam Brington, Redfin Premier Agent at Salt Lake City. “Some buyers are stepping coldly at how everything is going on in the world. But even with more cancellations, there are still many buyers and there are plenty of affordable homes in the desired locations quickly being sold.”
South sees the highest cancellation rate
Atlanta leads the nation with cancelled home sales, with a 19.8% drop in pending transactions in January. Other cities with high cancellation rates include:
- Orlando, Florida – 18.2%
- Las Vegas – 17.9%
- Houston – 17.8%
- Jacksonville, Florida – 17.8%
Florida is experiencing a slowdown as the state faces increased housing insurance costs, HOA fees and increased risk from natural disasters. Increased supply of available homes allows buyers to walk away more flexible if problems arise during inspections, Redfin added.
At the other end of the spectrum, San Francisco has a cancellation rate of just 4.1%, followed by San Jose, California (5.9%), Nassau County, New York (6.8%), Oakland, California (8.4%), and Seattle (8.7%).
These markets continue to be seller friendly, with low inventory and limited buyer replacements.
Wildfire drives to cancel sales in Los Angeles
Los Angeles saw a 15.9% drop in pending home sales in January, marking the highest cancellation rate in January since 2017. The Palisade and Eton wildfires, which destroyed thousands of homes, disrupted transactions around property risk and raised buyers’ concerns.
Although cancellation rates are below the peaks during the pandemic era, including a record 16.4% in March 2020, the upward trend indicates continued uncertainty in the housing market.
Some real estate agents advise buyers to monitor homes they missed as transactions are falling at higher rates.
“It’s worth checking in with a listing agent about a week after the house signs a contract,” says Allison Williams, Redfin Premier Agent in Sacramento. “Twice since the beginning of this year, we have had our clients secure a safe home as the original buyer retreated before the property was relisted.”
As mortgage rates fluctuate and economic uncertainty persist, the housing market will change in favor of buyers, increasing negotiating room or leaving.
