Halloween is just about a week away, but spooky season started early for the U.S. housing market.
In September, more than 53,000 home-purchase agreements were canceled—or 15% of all homes under contract, according to Redfin data released Wednesday. That’s nearly a 14% jump from the same time last year.
The housing markets with the highest percentage of pending sales that fell out of contract include:
- Minneapolis (11%)
- Boston (10%)
- New York City (9.6%)
- Seattle (9.5%)
- Montgomery County, Pa. (9.2%)
Buyers are ghosting sellers because—considering high home prices and mortgage rates—they expect homes to be near-perfect to follow through on a contract, according to Redfin. Plus, Jo Chavez, a Redfin Premier agent in Kansas City, Mo., said in a statement he’s seeing “a lot of buyer’s remorse.”
“Buyers make an offer, then they start worrying they could have found a better deal or a better home because there are more home sellers than buyers in the market,” Chavez said. “Some other buyers are backing out because they’re concerned about job security.”
Americans are so worried about the economy, in fact, a recent Fannie Mae survey showed a whopping 73% of them said it’s a bad time to buy a house. Meanwhile, only 32% of consumers said they expect their personal finances to improve during the next year, and 23% said they think things will get worse.
But aside from overall economic anxiety, buyers and sellers are failing to agree on concessions and repairs, according to Redfin. That’s a major shift from the pandemic-era housing market in which many buyers chose to forgo concessions and repairs in hopes of presenting a more favorable offer in a highly competitive housing market. That dynamic has flipped though, with the housing market showing signs its turning in favor of buyers.
“For prospective buyers who have been waiting on the sidelines, the housing market is finally starting to listen,” wrote chief economist Mark Fleming in an Aug. 29 First American post. That’s due to home price growth that is mostly flat or slightly declining because of decreasing demand and increasing supply, according to the National Association of Home Builders.
Redfin also says it’s a buyer’s market in most of the U.S.—and that’s why so many transaction cancellations are happening.
“Those who are still in the market know they have leverage,” according to Redfin. “It’s common to be choosier and ask for repairs, price reductions and other concessions. When sellers push back, or when inspections reveal new issues, many buyers are walking away.” Climate risks in the Sunbelt region have also discouraged some buyers from following through on contracts, according to Redfin.
Some sellers are delisting homes
While many buyers are pulling out of home purchase agreements, some sellers are also pulling their homes off the market.
“It’s a clear signal that buyers are holding more of the power right now, especially with inventory climbing and [mortgage] rates staying elevated,” Anthony Djon, founder of Anthony Djon Luxury Real Estate in Detroit, previously told Fortune.
That’s because they’re not getting the offers they think they deserve for their homes, and average time on the market is increasing. A recent Realtor.com report shows the typical home has spent 62 days on the market, a week longer than the same time last year.
“What we’re seeing nationally is a market that’s gradually rebalancing, with buyers gaining leverage and sellers facing a tradeoff: Adjust to the market and sell for less, or hold out and risk sitting indefinitely,” Realtor.com Senior Economist Jake Krimmel previously told Fortune. “Many sellers still aren’t pricing to sell.”
Redfin suggests that to keep home purchase agreements in place, sellers should get a pre-inspection, be realistic and flexible with concessions and repairs, and price the home appropriately. Even though buyers are “in the driver’s seat in much of the U.S.,” according to Redfin, they should still plan to get pre-approved, research insurance costs and HOA fees, and back out only if there are major issues or repairs needed that are unreasonable.
