A total of 54,000 people canceled contracts for homes they planned to buy in October. That is 17.2% of all homes that went to contract during the month. Redfin, which provided the data, said it was the highest level since it started to track the figure in 2017.
What has caused these cancellations? Redfin Tampa Sales Manager Eric Auciello said, “I’m seeing a lot of cold feet. Home prices are high, mortgage rates are high and insurance costs are high, and when buyers see the final number, a lot of them are backing out.” Others walk because of problems they found during home inspections.
The cancellations tended to be in hot housing markets with sharply rising prices. The cancellation rate in Las Vegas was 22.6%. And it was 23.7% in Orlando, 24.3% in Jacksonville, 23.6% in Fort Worth and 24.6% in Atlanta. Americans migrated to the South and other warmer climates as the COVID-19 pandemic allowed them to work from home. Many of these people left the two coasts because they were expensive. However, the rush of demand caused affordable markets like Fort Worth to become less affordable. Supply and demand. (You still can buy most homes in these 23 cities for under $125,000.)
The cities with low cancellation rates tended to be in the northern tier of states. Cancellation rates in October were only 10.8% in Boston. They were 11.4% in Milwaukee, 12.0% in Minneapolis and 10.6% in New York City. Several areas near New York City also had especially low cancellation rates, including 11.4% in Newark, 6.6% in Nassau County and 13.7% in New Brunswick, N.J.
Leaving aside location, mortgage interest rates have come down but remain above 6% for a 30-year fixed-rate mortgage. Two years ago, the number was 3%. For a home worth $400,000, which is about the national median, that can double monthly mortgage prices.
Cancellation rates will remain high as long as the monthly cost to own a recently purchased home remains so high.
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