Homebuyers increasingly forgo deals as market downturn bolsters bargaining power

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Around 63,000 home purchase contracts were canceled in July, or 16% of homes under contract that month. This is the highest rate for more than two years

SEATTLE–(BUSINESS WIRE)– (NASDAQ: RDFN) — Nationally, about 63,000 home purchase deals failed in July, or 16.1% of homes under contract that month, according to a new report by Redfin (redfin.com), technology-powered real estate brokerage. This is the highest percentage on record, with the exception of March and April 2020, when the onset of the coronavirus pandemic brought the housing market to a virtual standstill. That’s up from a revised rate of 15% a month earlier and 12.5% ​​a year earlier.

The housing market is slowing as higher mortgage rates push away many potential buyers. With the competition down, home hunters still in the market are enjoying new bargaining power, a stark contrast to last year when they often had to pull out all the stops to win. Buyers today are more likely to use contractual contingencies that allow them to walk away without financial penalty if something goes wrong. And with an increasing number of homes to choose from, they are also more likely to cancel a transaction if a seller refuses to lower the price or perform requested repairs – a situation that has become increasingly common given that vendors are still adapting to the cold market.

“Homes have been on the market longer, so buyers realize they have more options and more room to negotiate. They ask for repairs, concessions and contingencies, and if sellers say no, they back off and move on because they’re convinced they can find something better,” said Heather Kruayai, Redfin real estate agent in Jacksonville, FL. ‘a potential recession will cause house prices to plummet. They don’t want to end up in a situation where they buy a house that’s worth $200,000 less in two years, so some are choosing to wait in hopes of buying when prices are lower.

Alexis Malin, another Redfin agent in Jacksonville, warns there’s no guarantee buyers will be able to find better deals in the future. Annual house price growth has started to slow – to 8% today from 17% a year ago – but prices continue to rise and economists at Redfin do not expect them to s are collapsing.

“Some buyers who forgo deals think the market is collapsing and they can get a home for $100,000 less in six months. That’s not necessarily the case,” she said. “Homes in many parts of Florida are still selling for a pretty penny, so I’m warning my buyers that the grass might not be greener on the other side.”

Some buyers may also back off due to mortgage rates above 5%. Those who started their search months ago, when rates were closer to 3%, may realize that the type of home they once wanted is now out of budget as monthly mortgage payments have soared 40% year over year.

“Home purchase cancellations may start to decline as sellers get used to a slower-paced market,” said Redfin deputy chief economist Taylor Marr. “Sellers have already started to lower their prices after putting their homes on the market. They will likely start lowering the price of their properties from the start and become more and more open to negotiations.

Jacksonville and Las Vegas have highest rate of home purchase cancellations

In Jacksonville, about 800 home purchase contracts were canceled in July, or 29.3% of homes under contract that month. This is the highest percentage among the 93 US metropolitan areas analyzed by Redfin. This is followed by 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, Florida (24%), Atlanta (23.7%) and Pensacola, Florida (23.6%). Subways must have had at least 1,000 pending home sales in July to be included.

Six of the top 10 metros are in Florida. Florida has exploded in popularity among homebuyers during the pandemic and has also seen one of the highest price increases in the country. This slows competition, which means more buyers negotiate and back off if sellers don’t give them what they want. In Orlando, 37.4% of real estate listings written by Redfin agents faced competition in July, down from 81.4% a year earlier — the largest year-over-year drop among the metros analyzed by Redfin.

“The last four buyers I worked with all walked away from deals,” Malin said. “A client of mine asked the seller for money to cover the house to be repainted. The seller initially refused, so my buyer terminated the contract, but then the seller changed his mind and repainted the whole house. My buyer left anyway because he decided he didn’t like the house so much after all and he knew he had other options.

Kruayai, Jacksonville’s other agent, advises his sellers to make sure their homes are in pristine condition and to stand out from the crowd given the increased likelihood of buyers walking away. That means fixing missing shingles, faulty electrical boxes, and other issues buyers might encounter, and being open to negotiations.

Newark, NJ had the lowest rate of transaction cancellations. About 75 home purchase contracts failed in July, or 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, NY (7.1%).

To read the full report, including a graph of metro-level data, please 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 a home with brokerage, instant home buying (iBuying), rental, loan, title insurance, and home improvement services. We sell houses for more money and charge half the fees. We also run the #1 real estate brokerage site in the country. Our homebuyer clients see homes first with on-demand viewings, and our loan and title services help them close quickly. Customers selling a home can receive an instant cash offer from Redfin or have our renovation team repair their home to sell for the best price. Our rental business helps millions of people across the country find apartments and houses to rent. Since launching in 2006, we’ve saved our clients over $1 billion in commissions. We serve over 100 markets in the United States and Canada and employ over 6,000 people.

For more information or to contact a local Redfin estate agent, visit www.redfin.com. To learn more about housing market trends and download data, visit Redfin Data Center. To be added to Redfin’s press release mailing list, email [email protected]. To see Redfin’s press center, Click here.

Services for Redfin journalists:

Ally Braun, 206-588-6863

[email protected]

Source: Redfin

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