With all the uncertainty, it is no surprise that something that looked like a good deal a month ago may not now.
Why it matters: This is a sign of how fast the housing market adjusted to the surge in mortgage rates that started in March — and it signals the beginning of a return to sanity from the boom, with the balance of power shifting back to homebuyers. Prices are likely to cool somewhat.
Sharp rate increases didn’t just pump the brakes on the housing market, they drove it into a wall, said Taylor Marr, an economist at Redfin. But he expects the number of cancellations to come down as sellers adjust pricing to the new reality.
Zoom out: Typically, the majority of homebuyers enter into pending sales agreements with a contingency that allows them to back out of the deal if, say, the inspection comes back with issues, or something is off in the appraisal.
When the market was booming just a few months ago, a lot of buyers were waiving those contingencies. Those days are pretty much over — likely a cause for some of the uptick in cancellations.
Deals failing to close in formerly hot metro areas in the Southwest are soaring. In Las Vegas, they were 27%. Several Florida cities are seeing cancellations near 25%, including Lakeland, Cape Coral, Jacksonville and Orlando.Axios Markets By Emily Peck and Matt Phillips · Jul 12, 2022