Nearly 15% of all pending home sales failed to close in June, a new post-pandemic high according to an analysis from Redfin. What does this tell us? This tells that the real estate market is reacting quickly to the rise in interest rates in March, and a hopeful return from the insanity that has been the last two years. The sharp rate increases did not just pump the brakes on the housing market, it hit a wall. If borrowers decided to float their rate to “wait for rates to fall,” or did not lock their rate in time, they could have woken up just days after signing their purchase agreement to a rate that priced them out of the market. However, by the end of the summer, we hope that cancellations will come back down as sellers adjust their prices.
Six months ago, buyers were waiving contingencies like the inspection and appraisal gaps to make their offers stronger against all cash. In most areas, unfortunately not Miami yet, this is not the case anymore, another reason for the high number of contract cancellations. Home builders are also feeling a change in the market, with less foot traffic to homes and canceled contracts. “Quite a dismal traffic and sales climate," says one Phoenix builder quoted in the report. "Cancellations are extremely high.” One builder in Austin, Texas, sums it up. “Sales have fallen off the cliff. We are selling 1/3 of what we sold in March and April. Buyers have no urgency and are nervous about interest rates and inflation. Constant negative outlooks being reported consistently on the news aren't helping."
