Homebuyers increasingly back out of deals as slowing market strengthens negotiating power

About 63,000 home purchase agreements were cancelled in July, equivalent to 16% of homes under contract that month. This is the highest ratio in more than two years SEATTLE–(BUSINESS WIRE)–(NASDAQ: RDFN)–According to Redfin ( Nationwide, about 63,000 home purchase agreements fell through in July, equivalent to 16.1% of homes that were under contract that month, according to a new report from redfin. .com), a technology-powered real estate brokerage. That’s the highest percentage on record, with the exception of March and April 2020, when the outbreak of the coronavirus pandemic brought the housing market to a near standstill. It was up from a correction of 15% a month ago and 12.5% ​​a year ago. The housing market is slowing as higher mortgage rates put many would-be homebuyers on edge. With less competition, homebuyers who are still on the market are enjoying new bargaining power – a stark contrast to last year when they often had to go to great lengths to win. Buyers today are more likely to take advantage of contracts with contingent clauses that allow them to back out without financial penalties if something goes wrong. With more homes to choose from, sellers are also more likely to cancel a deal if they refuse to lower prices or request repairs – a situation that’s becoming more common given sellers are still adjusting to a cooling market . “Homes are staying on the market longer now, so buyers realize they have more options and more room to negotiate. They demand repairs, concessions, and contingency measures, and if the seller says no, They just quit and move on because they’re confident they’ll find something better,” said Heather Kruayai, a Redfin real estate agent in Jacksonville, Florida. “Buyers are also nervous because they Worry about a potential recession that could lead to a drop in home prices. They don’t want to end up in a situation where they bought a home and two years later it lost $200,000 in value, so some people choose to wait, hoping to buy a home when it’s cheaper. Alexis Malin, another Jacksonville-based Redfin agent, warns that there is no guarantee that buyers will find better deals in the future. Annual home price growth has started to slow — from 17% a year ago to 8% today — but prices are still rising, and Redfin economists don’t expect them to collapse. “Some of the buyers who got out of the deal had the mentality that the market was crashing and they would be able to get a house for less than $100,000 in six months. That doesn’t have to be the case,” she said . “Homes in many parts of Florida are still selling for a penny, so I warn my buyers that the grass on the other side may not actually be greener.” Due to 5%+ mortgage rates, Some buyers may also withdraw. Those who started their searches a few months ago, when interest rates were approaching 3%, may have realized that the type of home they previously wanted is now out of budget, as monthly mortgage payments soared nearly 40% year over year. “As sellers get used to a slow-paced market, cancellations may start to decrease,” said Taylor Marr, deputy chief economist at Redfin. “Sellers have already started lowering prices after putting their homes on the market. They may start lowering their property prices from the start and become increasingly willing to negotiate.” Jacksonville and Las Vegas have the highest cancellation rates In Jacksonville, approximately 800 home purchase agreements were cancelled in July, equivalent to 29.3% of homes under contract that month. This is the highest percentage of the 93 U.S. metropolitan areas analyzed by Redfin. Next are Las Vegas (27.4%), Lakeland, FL (26.2%), New Orleans (25.9%), San Antonio (25%), Orlando, FL (24.5%), Palm Bay, FL (24.5%) ), Deltona, FL (24%), Atlanta (23.7%) and Pensacola, FL (23.6%). Metros must have at least 1,000 homes for sale in July to be included. 6 of the top 10 metros are in Florida. Florida has seen a surge in popularity among homebuyers during the pandemic and has also seen one of the highest home price increases in the nation. That’s led to a slowdown in competition, which means more buyers are negotiating — and if sellers don’t give them what they want, they’ll pull out. In Orlando, 37.4% of home offers compiled by Redfin agents faced competition in July, down from 81.4% a year earlier — the largest year-over-year decline of any of the metros Redfin analyzed. “The last four buyers I worked with all pulled out of the deal,” Marin said. “One of my clients asked the seller for money to pay for the house being repainted. The seller didn’t agree at first, so my buyer cancelled the contract, but then the seller changed his mind and repainted the entire house. My buyer still walks opened because he didn’t think he liked the home that much after all, and he knew he had other options.” Another agent in Jacksonville, Kruyai, advised her sellers to secure their home Be at your best and stand out from the crowd with an increased likelihood of buyers exiting. That means fixing lost shingles, faulty electrical boxes and other issues a buyer might have, and a willingness to negotiate. Newark, NJ had the lowest deal cancellation rate. About 75 home purchase agreements fell through in July, equivalent to 2.7% of homes under contract that month. It was followed by Omaha, NE (4.9%), Nassau County, NY (5.9%), Rochester, NY (6.9%) and New York City, NY (7.1%). To read the full report, including charts of subway-level data, visit: https://www.redfin.com/news/home-purchases-fall-through-july-2022 About Redfin Redfin (www.redfin.com) is a technology-driven real estate company. We help people find housing through brokerage, instant home buying (iBuying), leasing, lending, title insurance and renovation services. We sell the house at a higher price and charge half the fee. We also operate the #1 real estate brokerage website in the country. Our homebuying clients see the home first with on-demand tours, and our loan and title services help them close quickly. Customers who sell their home can get an instant cash quote from Redfin or have our renovators fix their home for a premium price. Our rental business enables millions of people across the country to find apartments and homes for rent. Since our launch in 2006, we’ve saved our clients over $1 billion in commissions. We serve more than 100 markets in the US and Canada and employ over 6,000 people. For more information or to contact a local Redfin Realtor, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin’s press release distribution list, please email p[email protected]. To view Redfin’s newsroom, click here. View source version at businesswire.com: https://www.businesswire.com/news/home/20220816005305/en/Redfin Reporter Services:
Ally Braun, 206-588-6863 [email protected] Source: Redfin2022 Posted August 16 Read More