15.2% of Sun Belt buyers back out of deals due to rising rates, high prices

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15.2% of Sun Belt buyers back out of deals due to rising rates, high prices

The tide has turned and buyers are backing out of deals in the Sun Belt because rates are rising and home prices are unaffordable.

A new report from real-estate brokerage Redfin Corp. said that 15.2% of homes in cities in the Sun Belt fell through once the boomtowns went under contract in August, or about 64,000 homes nationwide saw deals drop.

A year ago, only 12.1% of home buyers were backing out of deals. Redfin said that 12% of deals fell through prior to the epidemic. The last time that number spiked was prior to this fall, it was at the beginning of the coronaviruses epidemic in March April 2020.

The Sun Belt's buyers were the ones who would back out of deals in cities such as Phoenix, Tampa, and Las Vegas, according to the company. The buyers were the least likely to back out of purchases in big cities, including San Francisco and New York.

The slowing housing market is allowing buyers to renege on deals because it often means they don't have to waive important contract contingencies in order to compete like they did during last year s home buying frenzy, according to Redfin.

Contingencies can include inspections to see if there is any issues with the home, or whether they can get the mortgage required, or whether the appraisal is different from the agreed-upon amount.

The company said that some buyers may be backing out of deals because they are waiting to see if home prices fall.

In August, more than a quarter of buyers looking to buy a home in Jacksonville, Fla. backed off in August, which is the highest percentage among the major 50 metro areas in the U.S. Las Vegas, Atlanta and Orlando. These 10 countries were hotspots during the pandemic for buyers as they were affordable and in the era of remote work.

Sun Belt cities, including Phoenix, Tampa and Las Vegas, attracted scores of house hunters during the epidemic, driving up home prices, Redfin said.

The housing markets in the nation are one of the fastest-cooling in the nation, giving buyers the freedom to bow out, they added.

Redfin looked at Multiple Listing Services data going back to 2017 to analyze the drop-outs.

The lowest share of buyers backing out of deals was Newark, N.J., at 2.7%, followed by San Francisco, Nassau County, N.Y. New York City and Montgomery County, Pa.

The high rates are a reason for the cancellations. The 30 year is at 6.29% as of Sept. 15. That was up from 2.88% a year ago.

The homes are expensive. The median price of an existing home in the U.S. is still $389,500 in August, up 7.7% from a year ago, the National Association of Realtors said.

With this tough backdrop of nervous buyers, I advise sellers to value their homes competitively based on the current market, Sam Chute, a Miami-based real estate agent at Redfin, said, because deals are falling through and buyers are no longer willing to pay pie-in-the-sky prices. The indigestion in the real-estate market was deliberately constructed: Home prices coming down as a result of higher rates and sellers reacting to lower demand is a good thing, Federal Reserve Chairman Jerome Powell said at a Wednesday press conference.

Powell said that housing prices were going up at an unsustainable level.

He said that for the long term, supply and demand must be better aligned, so that housing prices go up at a reasonable level and that people can afford houses again. The housing market may have to go through a correction to get back to that place. These are the top 10 cities where deals are falling through: