Real estate transactions are getting canceled at the last minute — for the most insignificant reasons.
The question is why?
Buyers are backing out of home purchase deals at a record rate — but real estate agents say deals are falling through on flimsy grounds.
We’re seeing nightmare scenarios where real estate sales are getting canceled at the last minute for the most minute reasons.
So, what’s the problem that’s giving buyers cold feet?
Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue. High mortgage interest rates continue to be a drag on home sales, discouraging both potential buyers facing high-rate mortgages and would-be sellers wanting to keep their low-rate mortgages.
Home purchases getting canceled at a record rate
A recent Redfin report reveals around 56,000 home purchases fell through last June — or nearly 15% of homes that went under contract — marking the highest percentage of any June on record.
Buyers are getting more and more selective. They’re backing out due to minor issues because the monthly costs associated with buying a home today are just too high to rationalize not getting everything on their must-have list.
Buyers around Western Washington are thinking twice about purchasing property right now with the median home sale price climbing to record highs in July.
Home price predictions for the remainer of 2024
Median Sale Price
- Overall, the median price for residential homes and condominiums sold in July 2024 was $650,000, an increase of 5.7% when compared to July 2023 ($615,000).
- The three counties with the highest median sale prices were King ($880,000), Snohomish ($775,000), and San Juan ($740,000), and the three counties with the lowest median sale prices were Columbia ($270,000), Pacific ($290,000) and Ferry ($319,900).
Some are also considering waiting it out a little longer in the hopes that the key rate could fall in September — even though policymakers just voted to hold it steady in July — and ease some of their affordability concerns.
“Although the Federal Open Market Committee of the Federal Reserve Bank did not lower rates at its July 31st meeting, it suggested that it might do so in mid-September,” Steven Bourassa, director of the Washington Center for Real Estate Research at the University of Washington, said. ‘“A weak jobs report, largely reflecting a growing labor force, combined with low inflation suggests that the Fed will indeed lower rates next month with additional rate cuts expected at subsequent meetings.”
Sellers are slashing prices
With fewer takers, properties are languishing longer on the market, with the number of active listings climbing nearly 38% since last year.
“We're seeing a slow shift from a seller's market to a buyer's market,” said National Association of Realtors chief economist Lawrence Yun in a recent press release.
“Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”
As a result, desperate sellers trying to offload their homes are reducing prices to reel buyers back in.
Nearly one in five homes for sale in June had a price cut — also the highest level of any June on record, reports Redfin. That’s a jump from 14.4% the year prior and just behind the 21.7% record set in October 2022.
Active Listings in Western Washington
- There was a 37.7% increase in the total number of properties listed for sale, with 15,122 active listings on the market at the end of July 2024, compared to 10,982 at the end of July 2023.
- The number of homes for sale increased throughout Washington, with 25 out of 26 counties seeing a double-digit year-over-year increase.
However, there are signs that the housing market is loosening up and that interest rates are declining and likely to decline even further in the coming months. Home sales are up 5.9% year-over-year in the NWMLS market area. According to Freddie Mac, 30-year mortgage rates are at their lowest since February 2024 (6.73% as of August 1st).
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Posted by Cary W Porter on
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