Homebuyers are backing out of deals at a record pace

“House hunters are having trouble committing because buying a home is more expensive than ever,” an analysis from Redfin published today read. It pointed to the median home sale price, which rose 4% from a year earlier to $442,525 in June, and the average 30-year fixed mortgage rate, which was 6.92%.

Sellers even cut their prices, but it didn’t seem to be enough. About one in five homes for sale last month had a price reduction, the highest amount of any June on record. It was up more than 14% from a year ago and barely below a record set in October two years ago. “Some sellers are reducing their prices because their homes are sitting on the market and getting stale—the result of an ongoing affordability crisis impacting buyers,” Redfin said. 

Homes sold in June typically spent 32 days on the market, three days longer than last year. The total number of homes for sale was close to 13% higher than a year ago, which happens to be the biggest annual increase on record. And yet, home sales were depressed. By Redfin’s count, home sales fell in June: 0.5% from a month before and 1.1% from a year ago; they were 21.5% below pre-pandemic numbers. It seems to be more of the same—inventory is improving, but demand is down, so homes are staying on the market longer, and sales are static.

“Sales are sluggish because many Americans can’t afford to buy homes, and because while mortgage rates ticked down in June (and have fallen further this month), some buyers are waiting on the sidelines in hopes that they’ll drop even more,” Redfin said. 

Existing home sales in June fell 5.4% on a monthly and annual basis, according to the National Association of Realtors. 

“We’re seeing a slow shift from a seller’s market to a buyer’s market,” NAR’s chief economist, Lawrence Yun, said in a release today. “Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”

Redfin’s analysis echoed that finding, citing a San Francisco-based real estate agent who said: “Buyers are getting more and more selective…They’re backing out due to minor issues because the monthly costs associated with buying a home today are just too high to rationalize not getting everything on their must-have list.”

Last month, according to NAR, the median existing-home sales price escalated to $426,900; it was the second straight month the price reached an all-time high and the twelfth consecutive month of yearly price gains. It’s slightly lower than Redfin’s estimate, but costly nonetheless, particularly when you couple it with mortgage rates that are still more than double their pandemic era lows. 

And it seems there are places where buyers are backpedaling more than others, starting with three metropolitan areas in Florida. In Orlando, about 900 purchase agreements were canceled, close to 21% of homes under contract in June. In Jacksonville and Tampa, 20.5% of homes under contract the same month fell through.

Florida’s situation is unique, however. “We’re seeing nightmare scenarios where deals are getting canceled at the last minute for the most minute reasons,” said a Redfin agent in Miami, where roughly 2,500 home purchases—more than 17% of homes under contract— were canceled in June.

He continued: “Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue. I don’t want my buyers to be surprised by all of the expenses that come with owning a home in Florida, so I advise them to proactively research the hefty costs of insurance, property taxes and [homeowners association] fees, in addition to the cost of their mortgage payment.”

Separately, another Redfin analysis from early June found housing markets in western Florida were cooling faster than anywhere else in the country for a few reasons: the increasing severity of natural disasters, plenty of new construction, and fading demand after a pandemic-era boom.