With Buyers Firmly in the Driver's Seat, Home-Purchase Cancellations Hit Highest Level in Nearly 3 Years

Nationwide, 14% of home-sale agreements that went under contract in July fell through—the highest share in nearly three years on a seasonally adjusted basis and up from 13.7% a month earlier. That's according to a new report from Redfin, the real estate brokerage powered by Rocket.

While the rate of contract cancellations reached a nearly three-year high in July, the increase from months and years past is small. The share of U.S. homebuying deals that have fallen through has posted small swings, from about 13% to about 14%, for the last four years. Deals are falling through at a higher rate than in 2020-2022, when the U.S. was in a hot seller's market.

This is based on a Redfin analysis of seasonally adjusted MLS pending-sales data. Please note: Homes that fell out of contract during a given month didn't necessarily go under contract that same month.

Contract cancellations are rising a bit because buyers have the power: The number of U.S. homebuyers dropped to a record low in July, and there were a near-record 51% more sellers than buyers in the market. That gives house hunters more options and makes them more likely to walk away if an inspection uncovers problems, an appraisal comes in low or the seller doesn't agree to concessions.

Affordability challenges are making buyers more cautious, too. Home prices remain high and mortgage rates are elevated, leaving many buyers with little financial wiggle room.

For sellers, preparation can reduce the odds of a deal falling apart. One option is to complete a home inspection before listing, which can flag issues that might otherwise surprise a buyer later. Sellers may also consider pre-marketing their home with Redfin Early Access to gauge the market and set the right price from the beginning.

A cancellation can also create an opening for other house hunters. A home that comes back on the market may face less competition, and the seller may be more motivated to reach an agreement the second time around. Buyers who lose out on a home they love can also ask their agent to officially put them in the backup position ; if the first deal falls apart, they get another shot without having to start from scratch.

Deals are falling apart at the highest rate in the South. In Atlanta, 19.8% of home-purchase agreements were canceled in July, the highest share among the 50 most populous U.S. metros with sufficient data. Next comes Houston, where 19.6% of homebuying contracts fell through. It's followed by San Antonio (18.7%), Las Vegas (18.6%) and Orlando, FL (18.2%).

Contract cancellations are most prevalent in those places partly because they're among the strongest buyer's markets in the country. In Houston, for instance, there are 130% more sellers than buyers. Many of those southern metro areas were popular during the pandemic, when low mortgage rates and remote work encouraged many Americans to move to relatively affordable places. Now, higher costs, a glut of newly built homes and the increasing frequency of natural disasters, among other factors, have left a lot of homes sitting on the market.