As fewer sellers list their homes, mortgage rates soar past 7% and the housing market slows to a crawl, Realtor confidence has plummeted, according to the latest survey by the National Association of Realtors.
Of the 2,784 respondents, just 11% said they expect a year-over-year increase in buyer traffic in the next three months, remaining flat from July, but down significantly from the 31% recorded in August 2021. Similarly, just 12% of respondents said they expect to see a yearly increase in seller traffic in the next three months, down from 14% in July and 25% a year prior.
The report also found that homes listed for sale received an average of 2.8 offers, down from 3.4 offers in June 2022. This decrease is in line with recent data from Redfin, which found that just 44.6% of offers written by Redfin agents faced competition in August. According to Redfin, this is the lowest bidding-war rate since the start of the pandemic.
In addition to homebuyer competition slipping, the number of pending home sales being canceled has also increased. Nationwide, roughly 64,000 home-purchase agreements fell thru in August, the equivalent of 15.2% of homes that went under contract that month, according to Redfin. By comparison, the rate was 12.1% a year ago. Redfin notes that the percentage of deals that have fallen through has hovered around 15% for the past three months, the highest level on record with the exception of March and April 2020 at the onset of the COVID-19 pandemic.
Similarly, homebuilders have reported increasing numbers of cancellations, particularly in the Sun Belt region.
The increased cost of financing is allowing buyers to back out of deals as they often don’t need to waive contract contingencies in order to compete. In addition, Redfin notes that some buyers might be reneging on contracts because they are waiting to see if home prices fall, as mortgage rates have risen to their highest level since 2008, greatly hampering buyers’ purchase power.
“House hunters today are taking their time and exploring their options, whereas six months ago, they had to act quickly and pull out every stop to compete because homes were selling almost immediately,” Tzahi Arbell, a Las Vegas-based Redfin agent, said in a statement. “Homebuyers now will agree to buy a house and be doing the inspection, and then back out because they found another home they love more.”
Sam Chute, a Miami-based Redfin agent added: “Some homebuyers are finding that by the time they go under contract and lock in their mortgage rates, rates could be much higher than they were when they toured the home and/or got pre-approved. That can kill the deal because the buyer is no longer financially comfortable with the purchase.”
Homebuyers were most likely to back out of deals in the Sun Belt cities, which were popular homebuying destinations during the peak of the pandemic.
In August, roughly 800 contracts were called off in Jacksonville, Florida, equivalent to 26.1% of homes that went under agreement that month. The top 10 was rounded out by Las Vegas (23%), Atlanta (22.6%), Orlando (21.9%), Fort Lauderdale, Florida (21.7%), Phoenix (21.6%), Tampa, Florida (21.5%), Fort Worth, Texas (21.5%), San Antonio (21.1%), and Houston (20.6%).
Las Vegas, Phoenix, Tampa and San Antonio have consistently ranked on Redfin’s list of top migration destinations, while, Jacksonville, Las Vegas, Orlando, Phoenix and Tampa, are among the fastest-cooling housing markets in the country, according to Redfin. In addition, San Antonio, Tampa and Phoenix currently have some of the lowest rates of homebuyer competition in the country.
On the other end of the spectrum, the metro areas with the lowest percentage of deal cancellations included Newark, New Jersey (2.7%), San Francisco (4.2%), Nassau County, New York (6.1%), New York (7%), Montgomery County, Pennsylvania (7.6%), San Jose, California (8.2%), Milwaukee (8.9%), Oakland, California (9.2%), Boston (10.1%), and Seattle (10.3%).
With the exceptions of Montgomery County and Milwaukee, Redfin reported that all of these metro areas experienced some of the largest net outflows of prospective homebuyers in July and August.