As home prices rise, more deals fall through
The number of housing deals that have fallen apart appears to have hit a high in June, according to data from Redfin. That’s people agreeing to buy a home, then backing out.
Maswari Asmawar, a Houston-based real estate agent with Compass, said he’s noticed more deals suddenly go south.
“There was a couple I particularly worked with for a very long time, a period of seven months. We looked at 20 properties,” Asmawar said.
They found the right one, made an offer and it was accepted. “However, during the process of getting them the financing they needed, it fell through,” he said.
To offer an interest rate the couple could afford, the bank required a bigger down payment than they expected. It was out of their reach. Asmawar said the biggest issue he’s seen is interest rates.
Daryl Fairweather, chief economist at Redfin, said she’s noticed these kinds of issues popping up too, not just in Texas.
“The share of deals that are falling through reached a new high for the year at 15%,” she said.
In fact, contract cancellations seem to have really picked up when the Federal Reserve started raising interest rates in 2022.
“Home prices are high, mortgage rates are high, which means buyers are likely buying at the edge of what they can qualify for,” said Danielle Hale, chief economist at Realtor.com.
So it doesn’t take much to be pushed over that edge, like Asmawar’s couple in Texas.
“I don’t think the consumers have given enough thought to the higher-mortgage-rate impact on their affordability,” said Jonathan Miller, president of real estate appraisal firm Miller Samuel.
Mortgage rates have been especially volatile this year — rates might go up before a buyer locks them in, and boom, they have to back out. Or rates drop and a buyer scraps the deal to get the better rate, said Redfin’s Fairweather.
But one problem in particular is there’s just not a lot of stuff on the market.
“When so few homes are coming on the market every week, you don’t know if this home that you’re making an offer on is the best out there or if in a couple weeks from now there might be a better home,” Fairweather said.
If there is, you might back out to get it.
But there may be a silver lining. If the Fed does lower overall interest rates in September, as many expect, mortgage rates should come down too.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
