BOSTON, MA — A recent analysis by Redfin highlights a notable shift in the Boston housing market, revealing that about 10 percent of pending home sales in the city fell through in June 2023. This increase in cancellations signals potential cooling in a previously competitive market.
The rise in contract fall-throughs is attributed to various factors, as buyers exhibit caution during the inspection period. Some individuals are choosing to back out due to new properties that come onto the market, taking advantage of what is largely considered a buyer’s market.
Overall, 14.9 percent of pending home sales across the United States faced cancellations in June, marking an increase from 13.9 percent a year earlier. This year’s figures represent the highest share of cancellations recorded in June since Redfin began tracking data in 2017.
This year, 8.4 percent of home sales specifically in June faced cancellations, reflecting the growing trend among buyers to be more selective in their choices.
In contrasting trends, Redfin suggests that the typical peak cancellation rates occur in the spring and at year’s end. However, the figures for June serve as a more accurate reflection of buyer sentiment amid changing market conditions.
As the housing landscape morphs into a buyer’s market with substantially more home sellers than buyers, Redfin identifies buyers as having increased leverage. In this climate, buyers may choose to walk away from deals if they encounter issues during inspection or if more appealing properties become available.
Financial considerations also play a crucial role in these cancellations. While U.S. home-sale prices remain at record highs, monthly mortgage payments—albeit slightly reduced—persist near their all-time high. Some potential homebuyers are reconsidering their purchases upon realizing the financial implications of such commitments, according to Redfin’s findings.
Economic uncertainties, particularly regarding inflation, tariffs, and looming recession fears, further contribute to decreased buyer confidence. “Buyers have leverage,” noted Crystal Zschirnt, a Redfin Premier agent in Dallas. Many buyers are opting to cancel deals either because they find preferred alternatives in the same price range or because they uncover issues that raise repair concerns.
Despite these deterrents, it’s also worth mentioning that some buyers entertain the hope that home prices or mortgage rates may soon decrease, though experts indicate such scenarios are unlikely. Redfin has previously forecasted a modest 1 percent decrease in national home prices by the end of 2025, with mortgage rates predicted to remain fixed around 6.8 percent.
Meanwhile, sellers find themselves in a new reality as they adapt to these market shifts. The need to finalize transactions has prompted many sellers to be more accommodating than in previous years, often agreeing to concessions in order to prevent sales from falling apart. Van Welborn, a Redfin Premier agent in Phoenix, stated, “Sellers are willing to make deals because in today’s buyer’s market, they don’t want to lose out on a sale once they have a buyer under contract.”
This shift in dynamics is especially evident as sellers navigate negotiations. For instance, a buyer recently managed to negotiate a $1 million price drop on a luxury property due to a septic issue discovered during inspection.
Regarding geographic trends, the highest rates of cancellations are occurring in the Sun Belt, with Jacksonville, Florida leading at over 21.4 percent. This region is followed by Las Vegas at 19.7 percent and Atlanta at 19.6 percent, indicating a significant market slowdown.
Other areas reporting high cancellation rates include San Antonio, Texas; Tampa, Florida; Orlando, Florida; Riverside, California; Phoenix; Fort Worth, Texas; and Miami. Analysts attribute these elevated numbers partly to increased inventories from new construction, particularly in Florida and Texas.
The rising rates of cancellations are exacerbated by soaring insurance costs tied to the increasing frequency of natural disasters, a concern highlighted by Redfin.
Conversely, certain regions, particularly in the northeastern U.S., report far lower cancellation rates. For instance, Nassau County, New York registered only 5.4 percent cancellations in June, the lowest among 44 major U.S. metropolitan areas analyzed by Redfin.
Montgomery County, Pennsylvania and Milwaukee followed closely with shares of 6.8 percent and 8.2 percent respectively. California also experienced significant cancellation rate increases, with Anaheim reporting a rise from 12.6 percent to 15.2 percent and Los Angeles escalating from 14.7 percent to 17.1 percent.
In summary, the June statistics illustrate a tangible shift in the housing market, characterized by increased buyer leverage and growing uncertainty. These evolving dynamics serve as critical indicators for both potential homebuyers and sellers navigating the current landscape.
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