By Nathalie Voit

Americans are reneging on plans to buy a home at the highest rate since the start of the COVID-19 pandemic, real estate brokerage Redfin said in a press release published on July 11.

The number of new home-purchase agreements that fell through nationwide rose to 60,000 in June, or just under 15%. Redfin said this was the highest share of cancelations since March and April 2020, when home sales abruptly stopped due to the start of the public health crisis.  

In contrast, the month of May saw 12.7% of homebuyers backing out of deals, while just 11.2% of pending sales went under contract one year ago.

Redfin Deputy Chief Economist Taylor Marr attributes the uptick in cancelations to higher mortgage rates and a slowing housing market.

“The slowdown in housing-market competition is giving homebuyers room to negotiate, which is one reason more of them are backing out of deals. Buyers are increasingly keeping rather than waiving inspection and appraisal contingencies. That gives them the flexibility to call the deal off if issues arise during the homebuying process,” she said.

“Rising mortgage rates are also forcing some buyers to cancel home purchases,” Marr added. “If rates were at 5% when you made an offer, but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home or you may no longer qualify for a loan.”

Redfin noted that the Federal Reserve’s aggressive monetary policy has successfully cooled inflation and slowed housing demand. However, those same interest rate boosts that have quelled homebuying demand have also made housing less affordable.

The result is a greater share of Americans reevaluating their real estate purchase.

“When mortgage rates shot up to almost 6% in June, we saw a number of buyers back out of deals,” Redfin real estate agent Lindsay Garcia said. “Some had to bow out because they could no longer get a loan due to the jump in rates. Buyers are also more skittish than usual due to economic uncertainty.”