We'll see how this plays out
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Approximately 600,000 home purchase agreements fell through in June, according to a new analysis by Redfin.
The figure is equivalent to 14.9% of homes that went under contract during the month, an increase from 12.7% in May and 11.2% a year ago.
June's percentage marks the highest cancellation rate since March and April 2020, when the housing market was rattled by the onset of the COVID-19 pandemic. Approximately 17.6% of homes under contract in March 2020 and 16.4% of homes under contract in April 2020 fell through.
Redfin deputy chief economist Taylor Marr attributes June's increase to a slowdown in housing market competition, which has given homebuyers more room to negotiate.
"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," Marr says.
In addition, Marr said that some homebuyers are being priced out of their deals due to higher mortgage rates. Following a 75 basis point hike by the Federal Reserve in June, the average commitment rate on a 30-year fixed mortgage climbed toward 6%.
"When mortgage rates shot up to almost 6% in June, we saw a number of buyers back out of deals," Lindsay Garcia, a Redfin real estate agent in Miami, 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."
Greenwich is not entirely isolated from what happens outside its gates, because home sales are often connected to each other through a complicated chain: in order to perform, your buyer, from New Jersey has to sell his house to a buyer in Illinois, who in turn must sell his house to a family moving from Kansas, and so on. When I practiced real estate law in the soft market of the 80s I witnessed a number of local sale fall apart precisely because one link failed, and brought the rest of the deals with it.
There are bridge loans, and hefty deposits to keep a buyer’s enthusiasm from flagging, but if the economy tanks, and people start losing their jobs out in the hinterlands, the process gets … messy.
