Around 63,000 home-purchase agreements were called off in July, a share equal to 16.1% of all homes that went under contract that month. With the exception of March and April 2020, that’s the highest percentage on record, according to Redfin, but why are buyers backing out at such a rapid pace?
It seems that a drawn-out seller’s market may be coming to an end, and rather than raising their budgets and squaring off for available homes, buyers are instead capitalizing on a market slowdown. As competition declines, those who can still afford to buy homes are taking advantage of newfound bargaining power and are more likely to negotiate for lower prices or utilize contract contingencies that allow them to back out of home-purchase agreements without financial penalty if a seller refuses to bring the price down or make requested repairs.
“Homes are sitting on the market longer now, so buyers realize they have more options and more room to negotiate. They’re asking for repairs, concessions and contingencies, and if sellers say no, they’re backing out and moving on because they’re confident they can find something better,” said Heather Kruayai, a Redfin real estate agent in Jacksonville, FL. “Buyers are also skittish because they’re afraid a potential recession could cause home prices to drop. 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.”