Home sales ticked up to their highest levels in a year last month as more sellers tried to sweeten the pot for buyers with price cuts and concessions.
Deterred by climbing home prices and high mortgage rates and homeowners insurance costs, would-be buyers backed out of deals at record levels in October, according to a new report from real estate brokerage Redfin. As a result, nearly a third of home sellers are making compromises to close the deal, including slashing prices and paying for closing costs, among other concessions.
“Home prices are high, mortgage rates are high and insurance costs are high, and when buyers see the final number, a lot of them are backing out,” Redfin Tampa Sales Manager Eric Auciello said in the report.
Homebuyers are backing out, sellers cutting prices
Pending home sales increased 1% from September to October, reaching their highest level in 12 months. While they sales are down 4.8% year-over-year, the annual decline was the smallest in nearly two years.
The housing market is far from ideal for buyers, even as mortgage rates fell (slightly) to 7.44% for the week ending in Nov. 16. The median U.S. home sale price climbed 3.5% last month to $413,874, and although the supply crunch eased a bit in October, the historically low number of homes for sale is keeping prices elevated and options limited.
Even though pending sales have crept up in the past few months, the number of closed home sales has continued to decline. Last month, closed sales were down 12.5% year–over-year.
Redfin found that a 54,000 home-purchase agreements were canceled in October. That’s 17.2% of homes that went under contract the same month, the highest percentage recorded by Redfin since it started tracking home sale data in 2017.
“Buyers want turnkey houses because everything is so expensive now, whereas in 2021 and 2022, they felt lucky to get any house,” Redfin Premier agent Heather Mahmood-Corley said in the report.
To compete in a tough market, sellers are slashing prices and yielding to buyers with concessions to close deals. Almost 21% of homes sold in October had a price cut, and 35% of sellers are offering concessions like cash for mortgage-rate buydowns, repairs or closing costs.
That said, Redfin expects the cancellation rate for home-purchase contracts may decrease in November thanks to declining mortgage rates.
Top 10 cities for home-purchase agreement cancellations
The following metropolitan areas saw the highest percentage of pending sales fall out of contract in October, according to Redfin:
Jacksonville, Florida (25.3%)
Atlanta, Georgia (24.6%)
Orlando, Florida (23.7%)
Fort Worth, Texas (23.6%)
Fort Lauderdale, Florida (23.4%)
Las Vegas, Nevada (22.6%)
Tampa, Florida (22.1%)
Houston, Texas (21.9%)
Riverside, California (21.4%)
Phoenix, Arizona (20.5%)
Every Saturday, Money dives deep into the world of real estate, offering a fresh take on the latest housing news for homeowners, buyers and daydreamers alike.
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