Cancellations of contracts to buy homes are most common in Atlanta, Fort Worth, Texas, and Jacksonville, Fla. In each of those places, roughly 18 percent of all home-sale agreements that went under contract in May fell through, according to a report from Redfin.
Nationwide, the portion of buyers backing out of contracts is smaller: 13.6 percent of May’s home-sale agreements fell through. That’s unchanged from a month earlier on a seasonally adjusted basis, and it’s the fourth month in a row that contract cancellations have held steady at the same rate.
The share of homebuying deals that have fallen through has been fairly stable for the last two years, swinging between 13.4 percent and 14 percent.
The fact that contract cancellations have steadied nationwide suggests that while affordability challenges continue to sideline some buyers, others have adjusted to higher mortgage rates. The weekly average rate has been over 6 percent for nearly four years, since late 2022.
Cancellations have inched down from their 2023 peak as buyers and sellers enter transactions with more realistic expectations. More sellers have come to terms with the fact that it’s a buyer’s market in most of the country. Many of them are pricing lower from the start, some are willing to lower their asking price to attract buyers, and some are willing to negotiate to keep deals together. In addition, buyers have generally become more accustomed to high housing payments.
Still, deals are falling apart at a higher rate than they were in 2020-2022, when the U.S. was in a red-hot seller’s market. That’s because there are hundreds of thousands more home sellers than buyers, giving buyers the option to back out if they find a home they like better. House hunters are also sometimes changing their minds due to financial instability caused by geopolitical turmoil, like the Iran war, and economic uncertainty, like inflation risk and lack of job security.
Deals are falling apart at a higher rate in certain parts of the country. They’re most prevalent in Atlanta and parts of Florida and Texas, as those places complete their one-eighty from pandemic homebuying hotspots to the strongest buyer’s markets in the nation.
In Atlanta, 18.8 percent of home-purchase agreements were canceled in May, the highest share among the 50 most populous metros with sufficient data. It’s followed by four other southern metros: Fort Worth, Texas (18.1 percent), Jacksonville, Fla. (17.9 percent), San Antonio, Texas (17.8 percent) and Orlando, Fla. (17.7 percent).
All in all, Texas was home to four of the 10 places where contract cancellations were most common, and Florida was home to three.
“Sellers need to pay attention and price realistically, because the market is leaning toward buyers,” Connie Durnal, a Redfin Premier agent in Dallas, said in a release. “I recently worked with smart sellers who knew how to get their home under contract and get the deal done: They had paid $400,000 for the home, but they listed at $390,000 because that’s where the market was. They were willing to consider offers under the list price and negotiate with buyers, too.”
In Atlanta, there are 70 percent more home sellers than buyers, giving buyers the upper hand and the mindset that if they back out of one deal, they’re sure to find another. In Fort Worth, there are 61 percent more home sellers than buyers, and in Jacksonville, the seller surplus is 74 percent. In both San Antonio and Houston, there are more than twice as many sellers as buyers.
Many of those southern metro areas soared in popularity during the pandemic, when low mortgage rates and remote work motivated many Americans to relocate to places with sunny weather and relative housing affordability. Construction of new homes skyrocketed to keep pace with demand, but now the demand is no longer there, due to elevated mortgage rates, higher home prices and the increasing frequency of natural disasters upping the cost of insurance and HOA fees. That has left a lot of homes on the market, with fewer buyers.
Contract cancellations are least common in San Francisco, where 3.9 percent of deals fell through in May. San Francisco’s housing market is booming, largely because of the AI boom.
Next are Nassau County, N.Y. (3.9 percent), New York (6.7 percent), San Jose, Calif. (7.1 percent) and Montgomery County, Pa. (7.3 percent). San Francisco, Nassau County and Montgomery County are three of seven seller’s markets in the U.S. House hunters in those places are motivated to hold deals together because there are more buyers than homes available for sale.
Contract cancellations increased month-over-month on a seasonally adjusted basis in most of the metros in this analysis. The biggest uptick was in Portland, Ore., where 16.3 percent of home-purchase agreements were called off in May, up from 14.3 percent a month earlier.
Next comes Oakland, Calif., where 10.2 percent of homebuying agreements were canceled, up from 8.2 percent. Houston (16.9 percent, up from 15 percent), Sacramento, Calif. (15.1 percent, up from 13.2 percent) and Pittsburgh (15.1 percent, up from 13.9 percent) round out the top five.
Contract cancellations decreased most in Columbus, Ohio, where 15.1 percent of deals were called off in May, down from 17.2 percent a month earlier. Next comes another Ohio metro, Cleveland (15.1 percent, down from 16.5 percent). Miami, West Palm Beach, Fla. and San Antonio follow.