Buyers Market or Buyers Backing Out?

Buyers have been backing out of deals after contracts have been signed and executed.

It’s clear the frenzied market of the last two years, with buyers making all-cash over-ask offers and waiving contingencies like home inspections, is over.

Rising interest rates, stock-market volatility, and general unease have made more buyers wary, leading to an increase in the number of deals falling through.

Home-sale cancellations nationwide have been happening at the highest percentage on record with 63,000, or 16 percent of all sales, canceled in July, according to an analysis by Redfin.

The current conditions have removed the sense of urgency. Many homeowners were selling to buy, and once buyers started falling through, sellers can’t sell, now they don’t have the funds to buy, causing a domino effect.

Brokers say most buyers who have backed out of contracts were impacted by rising interest rates. The interest rate for an average 30-year fixed-rate mortgage was 3.79 percent in January, but as of the end of August, it has climbed to 5.88 percent.

Many buyers are pivoting to buying condos or townhomes, except these sometimes have more stringent lending requirements. The added homeowners association boards must have enough reserves to avoid additional down payment requirements from the bank in order to lend.

A lot of buyers want to see how their buying power is impacted. A 1 percent interest-rate change can mean a difference between a single family home or an apartment, whether the buyer can afford a one-bedroom versus a two, or a renovated place versus an un-renovated on.

It’s only a matter of time before the brutality of the rental market drives people back into buying: “It seems like doom and gloom now, but there’s going to come a point when the rental market is so insane people are going to feel extorted if they don’t buy.”

On the bright side if you are looking to buy, as home sit on the market for longer, it is a great time to ask for seller contributions, put offers in under list price and use the challenging times to your advantage. Best of luck!

Source: https://www.curbed.com/2022/09/emotionally-paralyzed-buyers-are-backing-out-of-contracts.html