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With mortgage rates exceeding 6 percent and housing prices rising with them, homebuyers in the Sun Belt region are backing out of purchases at a higher rate than anywhere else in the United States.
Cities including Phoenix, Las Vegas, Tampa and Austin attracted homebuyers at a higher rate during the height of the pandemic when mortgage rates were low — driving housing costs to new highs as a result. But according to a report released Monday by Redfin, those Sun Belt cities are now cooling the fastest, and are the most likely to see homebuyers pull out of a deal before it’s certified.
Approximately 800 home purchase agreements were called off in Jacksonville, Florida, last month, equal to 26.1 percent of homes that went under contract in August — the highest rate among the 50 most populous areas in the United States. Jacksonville was followed by Las Vegas at 23 percent, Atlanta at 22.6 percent and Orlando at 21.9 percent, according to Redfin.
The Sun Belt includes Alabama, Arizona, Florida, Georgia, California, New Mexico Mississippi, Nevada, North Carolina, South Carolina, Oklahoma, Tennessee and Texas, according to the Kinder Institute for Urban Research at Rice University.
Nearly 64,000 deals fell through nationwide in August, according to Redfin, or 15.2 percent of homes that went under contract that month. That’s up from 12.1 percent in August 2021, and comparable to July’s rate of 15.5 percent.
As the market has slowed, it has allowed more buyers to back out of deals because less competition has resulted in fewer buyers waiving contract contingencies like inspection, financing and appraisal, meaning more buyers can cancel purchases if they find something wrong with the home, if they can’t get a mortgage, or if the appraisal is different from the agreed upon rate, the report states.
“House hunters today are taking their time and exploring their options, whereas six months ago, they had to act quickly and pull out every stop to compete because homes were selling almost immediately,” Tzahi Arbeli, a Redfin real estate agent in Las Vegas said in a statement. “Homebuyers now will agree to buy a house and be doing the inspection, and then back out because they found another home they love more.”
Surging mortgage rates also play a key role, with buyers suffering from sticker shock and backing out of purchases.
“Some homebuyers are finding that by the time they go under contract and lock in their mortgage rates, rates could be much higher than they were when they toured the home and/or got pre-approved. That can kill the deal because the buyer is no longer financially comfortable with the purchase,” Sam Chute, a Redfin real estate agent in Miami said in a statement. “I advise sellers to price their homes competitively based on the current market because deals are falling through and buyers are no longer willing to pay pie-in-the-sky prices.”