In a concerning trend for the housing market, the share of pending home sale deals being canceled in the United States has reached its highest level for January since at least 2017, reflecting ongoing economic uncertainty and elevated housing costs. According to recent analyses, over 41,000 home-purchase agreements fell through last month, equating to 14.3% of homes that went under contract during January.
This marks an increase from 13.4% a year earlier, underscoring a significant rise in cancellation rates and hitting the highest recorded figures since 2017. The factors contributing to this trend include persistently high home prices and mortgage rates, which have proven to be "stubbornly high." In January, the average mortgage interest rate soared to an eight-month high of 6.96%.
Market analysts and agents are expressing concern over these developments. Premier agent Sam Brinton from Redfin noted, "I'm seeing more homebuyers back out of deals than usual, and I'm hearing the same from other agents and mortgage lenders in the area. Some buyers are getting cold feet with everything going on in the world." This report indicates a troubling decrease in demand as housing inventory has reached its highest level since 2020.
Thursday’s data from the National Association of Realtors also highlighted that pending home sales in the U.S. fell more than previously projected in January, hitting an all-time index low. Certain areas, including Atlanta, Las Vegas, Houston, and parts of Florida, exhibited the largest shares of pending deals being canceled as supply increased.
Notably, Los Angeles experienced one of the most significant surges in nixed sales, largely attributed to the recent wildfires that have afflicted the region. Historically, the cancellation rates have seen peaks during significant economic events. For instance, a record 16.4% of deals were canceled in March 2020, coinciding with the onset of the coronavirus pandemic.
Nearly comparable rates of deals were shelved in October 2022 when mortgage rates surged over the 7% mark for the first time in two decades, prompting heightened concern within the market. Current Price: 6.68, Change: -0.97, Percent Change: -12.63..