Nearly 40,000 home-sale agreements nationwide were canceled in January, equal to 13.7 percent of homes that went under contract that month. That’s up from 13.1 percent a year earlier, and the highest January share in records dating back to 2017, according to a report from Redfin.
This is based on a Redfin analysis of Multiple Listing Service pending-sales data. The data is seasonal, which is why this January is compared to past Januarys.
Sales are falling through at a higher rate than in the past largely because it’s a buyer’s market, with hundreds of thousands more U.S. home sellers than buyers. That gives buyers negotiating power; they may back out during the inspection period if they see a home they like better or an inspection issue arises.
Another major reason buyers are backing out of deals is financial uncertainty, according to Redfin. While housing costs have come down from their peak, they are still near historic highs. Some would-be buyers are canceling purchases because they’re getting jittery about buying a house when they’re anxious about things like layoffs, tariffs and geopolitical tensions.
“More buyers are backing out,” Alin Glogovicean, a Redfin Premier agent in Los Angeles, where 16.7 percent of home purchase agreements were canceled in January, up from 15 percent a year earlier, said in the report. “They’re second-guessing the wisdom of making a huge purchase when there’s a fear in the back of their mind about the state of the economy and the uncertainty of their finances. That’s particularly true when they’re first-time buyers who don’t have equity from a previous home sale, and they’re using most or all of their savings on a down payment.”
In San Antonio, more than one in five (21.2 percent) home-purchase agreements were canceled in January, the highest share of the 47 major U.S. metros Redfin analyzed. It’s followed by Atlanta (18.5 percent) and Cleveland (17.9 percent). Riverside, Calif. (17.5 percent) and Orlando, Fla. (17.3 percent) round out the top five.
Cancellations are especially common in those places largely because they’re mostly buyer’s markets, which gives buyers the option to back out of deals and move on to the next house, according to Redfin. In San Antonio, for instance, there are twice as many sellers as buyers, and in Atlanta, there are 80 percent more.
On the other end of the spectrum, 3.5 percent of home-purchase agreements in San Francisco were canceled in January, the lowest share of the metros Redfin analyzed. It’s followed by Nassau County, N.Y. (4.8 percent), San Jose, Calif. (5.3 percent), Milwaukee (7.6 percent) and Oakland, Calif. (8.4 percent).
Contract cancellations increased most in San Antonio, rising from 15.6 percent last January to 21.2 percent this year. Next come Cleveland (17.9 percent, up from 14.9 percent) and San Jose, Calif. (5.3 percent, up from 2.9 percent).
The share of home-purchase cancellations fell year-over-year in 11 of the metros in this analysis. The biggest decline was in Tampa, Fla. (15.1 percent, down from 17 percent). It’s followed by Milwaukee (7.6 percent, down from 9.3 percent) and Nassau County, N.Y. (4.8 percent, down from 6.4 percent).