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Home-buying cancellations surge

Sticker shock has forced many homebuyers to walk away from signing on the dotted line.

The rate of pending home sales that fell through has reached the highest percentage in nearly a year, according to an analysis by Redfin published Friday, highlighting the immense financial pressure that buyers are under as they face both elevated interest rates and home prices.

“I’ve seen more homebuyers cancel deals in the last six months than I’ve seen at any point during my 24 years of working in real estate,” said Jaime Moore, a Redfin Premier real estate agent in Reno, NV. “Buyers get sticker shock when they see their high rate on paper alongside extra expenses for maintenance, repairs and closing costs. Many of them would rather back out, even if it means losing their earnest money.”

Nearly 60,000 home-purchase agreements fell out of contract in August, the data showed, an amount equal to nearly 16% of homes that successfully changed hands during the same month. The cancellations were up from 14.3% a year ago and registered the highest percentage of failed deals since October 2022, when mortgage rates surpassed 7% for the first time in two decades, Redfin said.

The average rate on the 30-year fixed mortgage increased to 7.18% this week, up from 7.12% the week prior, according to Freddie Mac. Rates have exceeded 7% for five straight weeks, and it is likely they will remain elevated in the short term as the market braces for the next Fed policy meeting next week.

The median home price in the US is $420,846, according to Redfin’s August data, up 3% compared to last year.