Shifts that have begun to occur in real estate markets across the country have resulted in more cases of people backing out of pending home sales, including in Oklahoma City and Tulsa, according to Redfin. (Photo by Dillon Kydd on Unsplash)
More potential homebuyers have tapped the brakes on sales or backed out altogether nationwide recently, including in Oklahoma City and Tulsa, as mortgage rates have risen and home inventory shortages have begun to ease.
Nationwide, roughly 63,000 home-purchase agreements fell through in July, equal to 16.1% of homes that went under contract that month, according to data provided by Redfin.
In Oklahoma City, the online brokerage said 22.7% of its pending sales contracts fell through that month, and in Tulsa 17.9% did.
Redfin analysts speculated that rising interest rates, which have sidelined many prospective homebuyers, have caused others to rethink pending deals. Some may believe that slowing sales will create more favorable options for them and that they’ll enjoy more bargaining power in negotiating deals later on. Some have begun stipulating contract contingencies that would allow them to back out of sales without financial penalty if something goes wrong. With an increasing number of homes to choose from, they’re also more likely to call a deal off if a seller refuses to bring the home sale price down or make requested repairs, Redfin said in a release.
“Homes are sitting on the market longer now, so buyers realize they have more options and more room to negotiate. They’re asking for repairs, concessions and contingencies, and if sellers say no, they’re backing out and moving on because they’re confident they can find something better,” said Heather Kruayai, a Redfin real estate agent in Jacksonville, Florida. “Buyers are also skittish because they’re afraid a potential recession could cause home prices to drop. They don’t want to end up in a situation where they purchase a home and it’s worth $200,000 less in two years, so some are opting to wait in hopes of buying when prices are lower.”
Another Redfin agent, Alexis Malin, said that despite the shifting leverage, there are no guarantees that buyers will be able to find better deals in the future. Annual home-price growth has begun to slow – to 8% today from 17% a year ago – but prices are still on the rise and Redfin economists don’t expect them to crash.
“Some buyers who are backing out of deals have this mindset that the market is crashing, and they’ll be able to get a home for $100,000 less in six months. That’s not necessarily the case,” Malin said. “Homes in many parts of Florida are still selling for a pretty penny, so I warn my buyers that the grass might not actually be greener on the other side.”
Some buyers may also be backing out due to 5%-plus mortgage rates. Those who started their search months ago, when rates were closer to 3%, may be realizing the type of home they wanted before is now out of their budget range.
In Jacksonville, roughly 800 home-purchase agreements were called off in July, equal to 29.3% of homes that went under contract that month, Redfin said. That was the highest percentage among 93 U.S. metropolitan areas analyzed. Next came Las Vegas (27.4%); Lakeland, Florida, (26.2%); New Orleans (25.9%); and San Antonio (25%).
Metros must have had at least 1,000 pending home sales in July to be included.
“Home-purchase cancellations may begin to taper off as sellers get used to a slower-paced market,” said Redfin Deputy Chief Economist Taylor Marr. “Sellers have already begun to lower their prices after putting their homes on the market. They’ll likely start pricing their properties lower from the get-go and become increasingly open to negotiations.”
Pending sales fall through as real estate markets begin to cool - Journal Record
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