The housing market across the US is seeing a meltdown.
Would-be buyers are pulling out of sale contracts in shocking numbers as their demands for expensive repairs and huge price chops are not being met.
And sellers are mad they are even making these demands.
Sellers now outnumber buyers in the housing market by about 500,000, according to a new report from Redfin.
Buyers are using that imbalance to wield more negotiating leverage, and as they demand high price cuts, sellers are refusing to face reality.
Florida saw one of the highest rates of home purchase cancellations, while San Jose, CA, saw the biggest uptick in cancellations year over year.
In August, an estimated 56,000 purchase agreements were abruptly cancelled, representing 15.1 percent of homes that went under contract that month, said the report.
That equals a staggering one in seven home deals in which a buyer pulled out. That’s the highest cancellation rate ever recorded in August since Redfin began tracking the metric in 2017.
‘Home purchases are falling through more frequently because buyers and sellers oftentimes aren’t on the same page and aren’t willing to compromise,’ said the report.
In today’s housing market, buyers hold all the power. They’re using it too; demanding every fix, discount or concession they can before closing. Many sellers just can’t afford the fixes or to cut the sale price.
Many buyers are walking away no matter how small the problem because they know there’s more inventory out there.
‘One of my buyers almost canceled a contract because she accidentally flushed her engagement ring down the toilet during the home inspection,’ said Phoenix-based Redfin agent Manny Bermudez.
‘The seller came home and both parties searched for the ring for two hours. The buyers never found it and took their bad luck as a sign to back out of the deal.’
The metro where the most contracts were canceled was Atlanta, GA, with 1,532 home-purchase agreements dropped in August, equal to 21 percent of homes that went under contract that month.
Next came Jacksonville, FL, (20.5 percent), Orlando, FL, (20.2 percent) and Tampa, FL, (19.4 percent).
Florida has been building more homes than any other state but Texas, prompting some buyers to back out of deals because they’re confident they will be able to find a different home that works better for them.
Some buyers in the Sunshine State are also getting cold feet due to increasing natural disasters and soaring HOA fees (Pictured: Hurricane Milton hits Sarasota)
In Jacksonville, Florida, buyers are increasingly pulling out of home buying contracts as sellers refuse to give them the concessions they want
Some buyers in the Sunshine State are also getting cold feet due to increasing natural disasters and soaring Homeowners Association (HOA) fees.
‘I worked with one seller who received 78 repair requests from a buyer following the inspection, and that was after the seller had already agreed to lower their $375,000 asking price by $25,000 because the house needed some improvements,’ said Dawn Liedtke, a Redfin real estate agent in Tampa.
‘The buyer came back and said they would handle the cost of the repairs, but only if the seller was willing to lower the price by another $100,000. The deal didn’t work out.’
Next was Las Vegas, NV, where 19.4 percent of home sales fell through, adding to the city’s housing market woes.
Other metros that have low cancellation rates are seeing huge upticks year over year.
San Jose, CA, which has one of the lowest rates, saw the largest uptick from last year, with its cancellation rate rising to 6.9 percent in August from 1.6 percent a year earlier.
There are a variety of reasons these deals are collapsing.
A September survey of 443 Redfin agents who experienced contract cancellations revealed the main causes, with 70.4 percent blaming inspection or repair issues.
Dawn Liedtke, a Redfin real estate agent in Tampa, detailed extensive concessions that buyers are now demanding since they hold the upper hand in the housing market
San Jose, CA, saw the largest uptick in cancelled home contracts from last year, with its cancellation rate rising to 6.9 percent in August from 1.6 percent a year earlier
Buyer financing falling through was responsible for 27.8 percent of cancellations.
Sales that were contingent on a buyer selling their own home caused 21 percent of contract breaks after the buyers couldn’t sell their current property.
Nearly 15 percent attributed cancellations to a sudden change in the buyer’s financial situation, like a job loss or an unexpected debt.
Buyers with the upper hand who simply found a better property made up 12.9 percent of cancelled contracts.
Panic about the broader economy also made for 12.2 percent of those who bailed.
In some cases, even when sellers bowed to every demand, deals still collapsed.
‘I had a listing where the buyers requested nearly $15,000 in pool repairs,’ said Kevin Alford, a Redfin agent in Oklahoma City.
‘My sellers went above and beyond, completing the work, paying out-of-pocket to make sure everything was perfect.’
In Las Vegas, NV, 19.4 percent of home sales fell through due to a number of reasons, frustrating sellers who want to offload their homes
Sellers are expected to go above and beyond, completing work and paying out-of-pocket to make sure everything is perfect because buyers are walking away
But even after the pool was repaired, the buyers failed to close on the scheduled date without notice.
‘The deal ultimately fell through, and it was heartbreaking for the sellers,’ he said.
Condo deals are especially rocky too, with sky-high HOA fees and special assessments scaring off buyers.
Meanwhile, many sellers are still operating under the illusion that their homes will sell quickly for top dollar with no concessions.
But the market has shifted, and sellers need to understand how flooded it is.
‘Many sellers are still operating like it’s 2021, assuming their home will sell as-is for top dollar,’ the report said.
‘Some are having a hard time adjusting to the reality that it’s no longer a seller’s market.
‘Sellers who purchased their homes during the peak of the pandemic are also often unwilling to negotiate.’
There are far more condo sellers than buyers in many major metro areas, particularly in Southern states like Florida
Condo deals are especially rocky, with sky-high HOA fees and special assessments scaring off buyers in the middle of negotiations
The flood of cancellations could trigger a major market crash, experts warn.
‘I’m waiting on the market to cycle as it did in 2008,’ Joel Efosa, who runs a company buying and selling homes, told the Daily Mail earlier this year.
In the meantime, Redfin offered advice for both sellers and buyers.
Sellers should do a pre-inspection to disclose issues early and consider securing a backup offer. Be flexible and adjust the price or make repairs if needed.
Shorten the inspection period or require a good faith deposit to keep buyers committed.
For buyers, they should get fully pre-approved, avoid new debt, and tour homes more than once before committing.
Review past inspection reports, expect minor issues, and get insurance quotes early. If buying a condo, review HOA documents and fees to avoid surprises.
