States in the Sun Belt, which comprises the traditionally sunny southern tier of the U.S., attracted an influx of homebuyers during the pandemic, which ultimately drove up prices and competition. However, the market is shifting, and those once sought-after cities are seeing a significant slowdown.
Data from Redfin found that 64,000 home purchase agreements fell through in August, or about 15.2% of total contracts signed that month. That’s up from 12.1% of contracts that fell through in August 2021. According to the data, homebuyers in Sun Belt cities such as Phoenix, Jacksonville and Las Vegas were most likely to back out of agreements. Buyers were least likely to back out in coastal cities such as San Francisco and New York, which are still seeing competitive housing markets. It’s unclear why homebuyers are backing out in droves, but a slowing market might be a factor, as buyers would rather wait to see what else is out there.
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“House hunters today are taking their time and exploring their options, whereas six months ago, they had to act quickly and pull out every stop to compete because homes were selling almost immediately,” Tzahi Arbeli, a Redfin real estate agent in Las Vegas, told the company. “Homebuyers now will agree to buy a house and be doing the inspection, and then back out because they found another home they love more.”
Rising interest rates might also be a factor. The average 30-year-fixed mortgage rate hit 6.29% this month, the highest it’s been since 2008. This might be driving homebuyers to rethink their decision as rates are significantly higher than when they first got approved for their loans.
Jacksonville, FL saw the most homebuyers back out in August at 26.1%. Following were Las Vegas at 23%, Atlanta at 22.6%, Orlando, FL at 21.9%, Fort Lauderdale, FL at 21.7%, Phoenix at 21.6%, Tampa, FL at 21.5%, Fort Worth, TX at 21.5%, San Antonio at 21.1% and Houston at 20.6%.
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