Home-sale cancellations jumped in June as buyers backed away

The U.S. housing market saw a rise in the percentage of deals cancelled in June as rising mortgage rates made homes more expensive, pushing some buyers to walk away from deals.

Across the country, nearly 60,000 home sales fell through, according to an analysis by Redfin Corp. That was equal to 15% of transactions that went into contract that month, the highest share of cancellations since April 2020, when early Covid lockdowns froze the housing market.

Even in a more normal time, deals can fall through for a wide range of reasons. Mortgage applications get denied and inspections reveal the need for expensive repairs. Sometimes a buyer just gets cold feet. In June 2021, when buyers were waiving contingencies and flooding into open houses, the number of canceled transactions equaled roughly 11% of contracts entered that month.

The least-affordable housing market in decades gives buyers more reasons to back out of contracts. The market is in a markedly different spot than it was in 2008 and few experts expect a similar crash. But the sudden run-up in borrowing costs this year — the average for a 30-year loan is now nearly double the rate at the beginning of the year — has quickly started to cool the once-frenzied buyer appetites. 

In Austin, Texas — a poster-child for the pandemic housing boom — a combination of historically high prices, rising mortgage rates and tax increases have cooled the market, said Redfin agent Crystal Lopez. That’s added to the risk that a transaction will fall apart.

In one recent instance, Lopez’s team helped a client reach a deal to sell an investment property for about $550,000. But a new tax assessment doubled the levy on the home, and the buyer walked away.

“As soon as I saw the first termination come through, I knew more were coming,” Lopez said.