Recently, more and more people in the United States have been delving into buying homes. But unfortunately, as mortgage rates grow and recession fears persist, more and more people are backing out of deals, based on reports by Redfin that were posted on Tuesday. Here's everything you need to know about the real estate market right now.
In July 2022, 16.1% of home-purchase agreements that had a contract didn't go all the way through. That means that nearly 63,000 of deals ended up being canceled by the potential buyer. According to Redfin, these numbers are the highest they have been since 2017, and one other time in March and April of 2020, thanks to the pandemic. "Homes are sitting on the market longer now, so buyers realize they have more options and more room to negotiate," Florida-based Redfin agent Heather Kruayai explained in the report. "They're asking for repairs, concessions, and contingencies, and if sellers say no, they're back out and moving on because they're confident they can find something better."
The immense amount of canceled deals is caused by a mix of a potential recession headed our way and also the resulting decline in property values. “The last four buyers I’ve worked with have all backed out of deals,” revealed Jacksonville-based Redfin agent Alexis Malin. “Buyers are skittish because they’re afraid a potential recession could cause home prices to drop,” Ms. Kruayai confessed. “They don’t want to end up in a situation where they purchase a home, and it’s worth $200,000 less in two years, so some are opting to wait in hopes of buying when prices are lower.”
Though a year ago, the price growth was 17% compared to the current rate of 8%, the research still reveals that a steady increase will occur, and there won't be a crash in the market any time soon. Add that with the thousands of cancellations, and Redfin economists believe this is yet another hindrance in real estate since the pandemic occurred. "Home-purchase cancellations may begin to taper off as sellers get used to a slower-paced market," Redfin deputy chief economist Taylor Marr wrote in the report. "Sellers have already begun to lower their prices after putting their homes on the market. They'll likely start pricing their properties lower from the get-go and become increasingly open to negotiations." Hopefully, the market will be booming soon enough. Stay tuned for updates.