As a homebuyer, it’s crucial to understand the current dynamics of the real estate market. Recently, a notable trend has emerged: a record number of home purchase agreements are falling through. This isn’t a reason to panic, but it is a reason to be prepared and have an expert on your side. Let’s break down what’s happening.
In July, approximately 58,000 home-purchase agreements were canceled across the U.S.. This represents 15.3% of all homes that went under contract that month, the highest rate for any July since records began in 2017.
Key Reasons Buyers Are Backing Out
- Economic Uncertainty: High home prices and mortgage rates are making buyers uneasy about their financial commitment.
- More Options, More Power: Buyers have more homes to choose from than in the past, giving them more negotiating power and removing the rush to close.
- Inspection Issues: Some buyers may back out during the inspection period if they discover an issue they are not willing to fix.
- Better Opportunities: With more inventory, a buyer might cancel their current contract if a home that better suits their needs comes on the market.
- Cold Feet and High Standards: A Cleveland real estate agent noted that common reasons for cancellations are simply cold feet or buyers having very high standards for their new home. It was also noted that cancellations are particularly common for buyers using FHA and VA loans.
Geographic Hotspots for Cancellations
- Cancellations were most common in Texas and Florida.
- San Antonio, TX, had the highest cancellation rate among the 50 most populous metro areas, with 22.7% of contracts falling through in July.
- Other cities with high cancellation rates include Fort Lauderdale, FL (21.3%), Jacksonville, FL (19.9%), and Tampa, FL (19.5%).
- One reason for the high rates in Texas and Florida is the significant amount of new home construction, which gives buyers confidence that they can find a different, better home if they back out of a deal.
- In Florida specifically, some buyers are getting cold feet due to soaring insurance and HOA fees, as well as an increase in natural disasters.
What’s Next for the Housing Market?
While cancellations are up, it’s worth noting that the market tides may be starting to shift. Mortgage rates have been coming down, which could bring some buyers who were on the sidelines back into the market. Additionally, housing supply is beginning to tick down, which could increase urgency for active buyers.
Navigating a complex market requires a steady, experienced hand. Understanding your financing options and being prepared can make all the difference between a canceled contract and getting the keys to your new home.
For expert guidance on your home loan journey, contact me today!
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Sal Trapani Mortgage Banker, Owner MJ Mortgage LLC Cell: 281-608-2846 Email: sal@mjmortgagellc.com Website: www.mjmortgagellc.com Address: 33130 Magnolia Cir, Magnolia, TX 77354 NMLS 1055510, NMLS 2381195
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