A pickup in home purchase agreements falling through before they’re finalized signals the latest sign of trouble in the U.S. housing market.
Some 6% of pending contracts to buy a home were canceled in May, down from 7% in April, but up from 5% in May last year, according to data from National Association of Realtors. May is the third consecutive month with an annual increase in cancellations of pending home sales.
A separate analysis of housing data by Redfin found that 14.6% of all pending sales in May fell out of contract, up from 14% in May last year, and the highest cancellation percentage for the month of May going back to at least 2017.
The trend underscores how even home shoppers who manage to sign a deal with a seller can end up having to back out because of unexpected costs; changes in their credit, employment, or financial status; or a low appraisal.
“Stock market fluctuations, restrained consumer confidence and broader economic and geopolitical uncertainties may be leading to higher-than-normal cancellation rates in recent months,” says Lawrence Yun, NAR’s chief economist.
The U.S. housing market remains in a sales slump going back to 2022, as elevated mortgage rates and rising home prices nationally keep pushing the cost of homeownership well beyond what many would-be homebuyers can afford.
While sales of previously occupied U.S. homes in May remained at the slowest pace since 2009, pending U.S. home sales rose 1.8% from the previous month and increased 1.1% from May last year, the NAR said Thursday.
A home sale is listed as pending when the purchase contract has been signed but the transaction has not closed. There’s usually a month or two lag between a contract signing and when the sale is finalized, which makes pending home sales a bellwether for future completed home sales.
A snapshot by Redfin of pending U.S. home sales for the four weeks that ended June 22, shows they fell 2.3% from a year earlier, the biggest drop in three months.
