Think back to March 2020, when the effects of the Covid-19 pandemic were impacting the nation. That’s the last time a dramatic surge in houses falling out of contract occurred, according to Realtor.com.
Think of it as “ghosting the market,” if you will.
According to Realtor.com, the winter blues are hitting the housing landscape, and buyers are snapping up a home from the wealth of active inventory, then backing out after it has gone under contract.
While the share of home sales falling out of contract this year looks much like last year, ending December at 7.1%, unchanged from a year earlier, according to Realtor.com data scientist Sabrina Speianu, five markets are being hit the hardest.
The largest percentage of buyers backing out of homes under contract is in Atlanta (10.3%), Las Vegas (10.1%), San Antonio, Texas (9.6%), Riverside, California (9.3%), and Phoenix, Arizona (9.2%), according to Realtor.com data.
Sales of Existing Homes Nosedives
Realtor.com said that this news comes as sales of existing homes nosedived 8.4% in January—the slowest sales pace in more than two years, even as mortgage rates reached a three-year low of 6.09%.
“In past periods when mortgage rates were rising—including 2018, 2022, and 2023—a higher share of homes returned to the market than we’re seeing today,” Speianu said. “Overall, contract cancellations appear to be more closely tied to sudden increases in borrowing costs than to periods when rates remain elevated but stable.”
There could be a variety of reasons why buyers are breaking contracts, Realtor.com said, including finding another home that’s cheaper or locking in a lower mortgage rate.
The Atlanta metro has a median list price of $400,000 and more than 23,000 active listings as of January, Realtor.com noted. That area leads the country with the number of contracts falling through at 10.3%.
Bruce Ailion, a real estate professional and attorney with Re/Max Town & Country, told Realtor.com that he thinks the significant inventory growth in the Atlanta region has contributed to buyers backing out.
Ailion said the standard Realtor promulgated purchase and sale agreement has a due diligence/inspection period.
“That allows for termination for any reason or no reason. When a buyer sees a better opportunity in the due diligence period they can move on,” Ailion said. “With buyers having more options and many sellers reducing their price, a higher number of buyers are terminating an agreement when they find a more attractive purchase during their due diligence.”
More Homes to Choose From
Realtor.com senior economist Jake Krimmel agreed, saying, “as inventory grows and the pace of sales slows, that means the buyers in those markets have more homes to choose from and fewer other buyers to compete with.
“Given those more favorable market conditions, it’s no surprise that some buyers are pulling out of deals in those metros in particular.”
Realtor.com said that overall, inventory increased modestly in all four major U.S. regions in January compared with the prior year, according to the Realtor.com January Monthly Housing Market Trends report.
The post Ghosting the Market: Metros Where Buyers are Backing Out of Deals first appeared on The MortgagePoint.
