Transaction Blowups: Deal Cancellation: Uptick

In Houston, Elevated mortgage rates, soaring home prices and misgivings about affordability are shaking potential homebuyers’ confidence, causing scores of them to pull out of already agreed-upon purchase transactions, states a just-released study by Seattle-based real estate brokerage Redfin.

Across the nation, it says, one in seven pending home sales contacts agreed to during January was canceled, the largest share of rescinded near-buys during this time of the year since at least 2017, possibly even before.

Just over 41,000 U.S. home-purchase deals fell through in January, equating to 14.3 percent of home buyers bowing out of contracts already agreed to. A year earlier, the national walk-away rate by folks who had committed to acquiring a residence was 13.4 percent.

The quantity of canceled contracts varies significantly from coast to coast, the report says, from the highest share of voids, 19.8 percent in Atlanta, up from 16.6 percent for this same time period last year, to the lowest, 4.1 percent in San Francisco, up slightly from 3.8 percent last year.

Somewhere near the top of that cancellation roster is Houston, where Redfin says 17.8 percent of would-be purchasers in January 2025 walked away after shaking hands on a deal to buy a home. That was a hike from the Space City’s January 2024 transaction rejection rate of 15.5 percent.

The Redfin report analyzed annulment levels in the nation’s 50 most populous cities and came up with this top five list: Atlanta (listed above); Orlando, 18.2 percent this year, up from 16.8 percent in January 2024; Las Vegas, 17.9 percent this year, up from 16.4 percent last year; Houston, also listed above, and Jacksonville, 17.8 percent, up from 16.4 percent.

Redfin listed no specifics about the Houston situation other than to say that communities in the South are seeing the high share of home-buy deals falling through.

Shae Cottar, chairman of the Houston Association of Realtors, shed some light on the community’s transaction woes: “HAR does not specifically track the reasons behind terminated home sales. It is likely due to market forces and economic factors. The rare snowstorm and resulting closures around the Houston area may have also impacted home sales in January.”

Redfin said 37 of the 50 most populous metros in the U.S. saw home-purchase cancellations rise as a percentage of all pending sales.

“I’m seeing more homebuyers than usual back out of deals, and I’m hearing the same from other agents and mortgage lenders in the area,” said Sam Brinton, a Redfin agent in Salt Lake City.

“But even with more cancellations, there are also more buyers out there in general. Nice homes in desirable locations are selling quickly, and those buyers are less likely to cancel.”

The report cites some reasons why potential homebuyers have second thoughts:

• Supply is rising and demand is falling. Housing inventory has risen to its highest level since 2020, giving homebuyers more options. At the same time, pending home sales fell to their lowest level on record (aside from the start of the pandemic) in January.
• Economic uncertainty. Redfin agents say some deals are falling through because buyers (and sometimes, sellers) are alarmed by widespread economic and political uncertainty. Tariffs, layoffs and federal policy changes are among factors contributing to an air of instability.
• Sticker shock. Mortgage rates and home prices remain stubbornly high, with January’s average rate hitting 6.96 percent, an eight-month high (weekly average rates have since declined to 6.76 percent), and the median U.S. home-sale price rising 4.1 percent.

The fewest home-purchase agreements being cancelled nationally area in the Bay Area, says the report. San Francisco notched the lowest share, with 4.1 percent of deals taking a dive, followed by San Jose (5.9 percent), Nassau County, N.Y. (6.8 percent), Oakland, Calif. (8.4 percent) and Seattle (8.7 percent).

Redfin said these markets all currently tilt toward sellers, with a limited supply of available domiciles on the market, meaning buyers typically don’t have many other choices if they back out of a deal.

The portion of home-purchase agreements being cancelled is above typical levels for the start of the year, but it’s lower than cancellation spikes reported at the start of the pandemic and in late 2022.

Buyers blew off a record 16.4 percent of transactions in March 2020 when the arrival of COVID scared many purchasers away. Nearly as many deals tanked in October 2022 when mortgage rates soared above 7 percent for the first time in 20 years.