December 9, 2022

Prospective homebuyers in the once-red-hot Sun Belt are backing out of purchase contracts in droves as the housing market cools, according to a Redfin analysis released Monday.

Approximately 64,000 home purchase contracts were nixed in August, according to data compiled by the real estate firm. That total amounted to 15.2% of all homes in contract last month.

The highest cancellation rates were found in “pandemic boomtowns” located in Sun Belt states. All 10 cities with a back-out rate of 20% or higher were located in the region.  

Jacksonville, Florida, outpaced all other cities with 26.1% of pending sales dropping out of contract in August. Las Vegas, Nevada, ranked at 23%, followed by Atlanta at 22.6%, Orlando at 21.9% and Fort Lauderdale at 21.7%.

“A slowing housing market is allowing buyers to renege on deals because it often means they don’t need to waive important contract contingencies in order to compete like they did during last year’s homebuying frenzy,” Redfin said in a blog post on the trend.

Sun Belt boomtowns such as Phoenix are experiencing a housing slowdown.
Bloomberg via Getty Images

The Sun Belt broadly refers to states located in the lower third of the United States and known for their warm climates.

Across the US, the cancellation rate has held above 15% for the last three months — the highest number on record when excluding the upheaval that occurred during the first two months of the COVID-19 pandemic in March and April 2020, according to Redfin.

Redfin noted that rates were lowest in many cities where workers are returning to the office after months of remote work.  For example, just 7% of home purchase contracts were canceled in New York last month.

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Tampa Bay
Many of the cities with the highest cancellation rates are located in Florida.
Christopher Sadowski

A surge in mortgage rates has effectively slammed the brakes on buying activity in many markets — especially those where home prices surged during the pandemic-era housing boom. A 30-year fixed-rate mortgage hit 6.29% last week, according to Freddie Mac, up 3.41% compared to the same week one year ago.

“Some homebuyers are finding that by the time they go under contract and lock in their mortgage rates, rates could be much higher than they were when they toured the home and/or got pre-approved. That can kill the deal because the buyer is no longer financially comfortable with the purchase,” said Sam Chute, a Miami-based Redfin real estate agent.

As The Post has reported, home prices have begun to fall in overheated markets as sellers slash their ask to attract buyers. One expert predicted that prices could fall by up to 20% during the housing correction.