With a buyer's market in full swing, prospective homeowners are increasingly backing out of purchase agreements, as reported by data from Redfin. The real estate company indicated that there are approximately 500,000 more sellers than buyers currently, leading to buyers possessing greater bargaining power. This allows them to request sellers fund necessary repairs and seek reductions in the asking price.
TL;DR
- Prospective purchasers are withdrawing from agreements at an unprecedented rate, with 15.1% of August deals failing to close.
- Home inspection or repair issues are the leading cause for canceled contracts, cited by 70.4% of Redfin agents.
- Sellers struggle to adapt to the buyer's market, with many still expecting high prices from the 2020-2021 boom.
- Home sales are headed for their worst year since 1995 due to economic concerns and high ownership expenses.
Simultaneously, numerous vendors are failing to address the anxieties of prospective purchasers, who have grown more discerning and are requesting additional compromises.
In August, approximately 56,000 U.S. Purchase agreements were terminated, accounting for 15.1% of homes that had entered into contract. This figure marks the highest proportion of August deals that failed to close since records began in 2017. It also represents an increase from 14.3% in August 2024 and is considerably higher than the 11.4% rate observed in August 2021, during the peak of the post-pandemic housing boom.
“Home purchases are falling through more frequently because buyers and sellers oftentimes aren’t on the same page and aren’t willing to compromise,” Redfin said in its report.
According to a survey of Redfin's real estate agents, 70.4% cited home inspection or repair problems as the reason for canceled contracts, making it the leading cause by a significant margin.
That was followed by 27.8% who said buyer financing fell through, 21% who said buyers were unable to sell their current homes, 14.9% who cited changes in a buyer’s financial situation, and 12.9% who said a buyer had found another house they preferred.
Many cities experiencing elevated cancellation figures were located in Florida and Texas, states that have witnessed a substantial increase in housing availability following a pandemic-induced migration that spurred a construction surge.
Meanwhile, sellers still think their homes will command high asking prices as they did during the housing bonanza in 2020 and 2021, or they paid so much for their properties and aren’t willing to budge on the price.
A new reality for sellers
“Some are having a hard time adjusting to the reality that it’s no longer a seller’s market, because it seems like just yesterday that homes were getting dozens of offers and fetching tens of thousands of dollars over the asking price,” Redfin said.
The report additionally highlighted that less expensive residences are sought after more due to the significant rise in total homeownership expenses lately, and these properties are more prone to encountering problems during inspections.
In states such as Florida and California, where natural disasters have been more frequent, insurance premiums have climbed, thereby raising the overall cost of ownership.
Mortgage rates are still elevated, even though they've decreased since the Federal Reserve reduced its key lending rates.
Actually, pending home sales actually fell occurred in September, marking the first instance in almost three months, despite the average weekly mortgage rate declining for nine weeks straight.
Amid the weak demand, home sales are headed for their worst year since 1995 as economic concerns spread from buyers to sellers. A Fannie Mae survey earlier this month showed nearly 70% of Americans believe the economy is headed in the wrong direction, and 73% think it’s a bad time to buy a house.
Despite considerable apprehension, some sellers who are amenable to buyers' requests find themselves unable to overcome their hesitations.
Dawn Liedtke, a Redfin real estate agent in Tampa, stated “I worked with one seller who received 78 repair requests from a buyer following the inspection, and that was after the seller had already agreed to lower their $375,000 asking price by $25,000 because the house needed some improvements,”. “The buyer came back and said they would handle the cost of the repairs, but only if the seller was willing to lower the price by another $100,000. The deal didn’t work out.”