Oct 23, 2023 - Economy

High interest rates push homebuyers to back out of deals

Data: Redfin analysis of MLS data; Chart: Axios Visuals
Data: Redfin analysis of MLS data; Chart: Axios Visuals

About 16% of pending home sales fell through in September as mortgage rates climbed to new highs, according to new data from Redfin.

Why it matters: It's another sign of how high rates — now nearing 8% on a 30-year fixed mortgage — are crushing housing activity.

Zoom in: Typically, homebuyers sign sales agreements with a contingency that lets them back out of the deal if, say, there's an issue with an inspection or something's off in the appraisal.

  • But deals can also fall apart because surging mortgage rates suddenly mean the buyer can no longer afford the house — perhaps because they didn't lock in a rate when they went into contract, or their rate lock expired.
  • Such buyers either walk away — or underwriters pull approval.

Buyers are just more jittery now. Meanwhile, home sellers, locked into low mortgage rates, are less likely to make concessions to nervous buyers, said Daryl Fairweather, Redfin's chief economist. They're not "super-motivated."

The bottom line: This is partly why home sales are on track for their slowest year since the housing crisis.

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