A growing share of U.S. home sales collapsed in July as wary buyers pulled back, underscoring the strain of elevated mortgage rates despite a modest uptick in overall existing-home sales.
Roughly 58,000 purchase agreements fell through last month, equal to more than 15 percent of homes that went under contract, according to real estate brokerage Redfin. That’s the highest cancellation rate for July since the company began tracking the data in 2017.
Texas and Florida saw the most scrapped contracts, with San Antonio topping the list at nearly one in four deals canceled. Florida metros, including Fort Lauderdale, Jacksonville, and Tampa, also recorded some of the highest cancellation rates.
Real estate agents say buyers are taking advantage of a market where listings linger longer, giving them time to keep shopping or back out during inspections.
The most common reasons buyers back out are cold feet, high standards, and inspection issues, according to Bonnie Phillips, a Redfin agent in Cleveland.
She added that cancellations are especially common in borrowers using Federal Housing Administration loans and Department of Veterans Affairs loans, who can face more financing hurdles.
The cancellations came alongside a small uptick in overall sales. The National Association of Realtors (NAR) reported on Aug. 21 that existing-home sales rose 2 percent in July to an annual rate of just over 4 million units, up slightly from June’s nine-month low.
“The ever-so-slight improvement in housing affordability is inching up home sales,” NAR chief economist Lawrence Yun said in a statement.
“Wage growth is now comfortably outpacing home price growth, and buyers have more choices.”
Still, affordability remains the biggest challenge. The median existing-home price stood at $422,400 in July, barely changed from a year earlier, according to NAR data. Mortgage rates averaged 6.7 percent in July, more than double what buyers could lock in three years ago.
The strain is also evident among homebuilders.