Near-record-high home prices and spiking interest rates aren’t just driving home sales down to their lowest levels in well over a decade—they’re also increasingly leading more buyers who actually had offers accepted to drop out of their agreements as they reassess their budgets and find homeownership doesn’t necessarily fit anymore.
An estimated 53,000 home purchase agreements fell through in September, over 16% of homes that went into contract that month, according to real estate brokerage Redfin. That’s the highest rate of cancellations—defined as pending sales that fell out of contract, as a percentage of overall pending sales—since last October.
That’s no surprise, as the average 30-year mortgage rate surpassed 7% in September, the highest in two decades (and then went even higher, to 8%), and prices remained sky-high.
In fact, it’s cheaper to rent than to buy in nearly every major market in the U.S., with the Wall Street Journal reporting that high mortgage rates make buying 52% more expensive on average than renting in this climate, citing a CBRE analysis.
Median rents have been dropping across the country, improving affordability for tenants and helping them rethink their desire to enter the housing market at this profoundly pricey time. Homebuyers must earn north of $114,600 to afford the median-priced U.S. home, according to a separate Redfin analysis.
Ever-increasing insurance premiums and disagreements on who’s responsible for needed repairs are also behind the cancellation rate, Heather Kruayai, a Redfin Premier agent in Jacksonville, said in the report. Given the astronomical prices, homebuyers are being more cautious, Kruayai said. “Buyers hold a lot of the cards right now, and sellers are having to give out more concessions to close the deal.”
Speaking of high insurance costs, the metro areas with the highest share of cancellations include Atlanta (24.4%), Jacksonville (24%), Orlando (23.6%), Tampa (22.7%), and Fort Lauderdale (22%), well over the already high national average cancellation rate of 16.3%.
Also in September, existing-home sales dropped to their lowest figure since 2010, according to the National Association of Realtors, and closed sales overall fell to the lowest level since the COVID-19 pandemic began, per Redfin’s report. When every aspect of homeownership is increasing with seemingly no end in sight, buyers are finding the prospect less and less attractive.
Despite the cancellations, there still just isn’t that much inventory, even with new listings inching up last month. That’s keeping prices high and more buyers on the sidelines.