As fewer sellers list their homes, mortgage rates top 7% and the housing market slows, real estate agent confidence has plummeted, according to the latest survey from the National Association of Realtors.
Of the 2,784 respondents, only 11% said they expect a year-over-year increase in shopper traffic over the next three months, remaining flat from July but down significantly from 31% recorded in August 2021. Similarly, only 12% of respondents said they expect an annual increase in seller traffic over the next three months, compared to 14% in July and 25% the previous year.
The report also revealed that homes put up for sale received an average of 2.8 offers, compared to 3.4 offers in June 2022. This drop is in line with recent data from Redfin, which revealed that only 44.6% of offers drafted by Redfin agents faced competition in August. According to Redfin, this is the lowest bid war rate since the start of the pandemic.
In addition to less competition from homebuyers, the number of canceled pending home sales has also increased. Nationally, about 64,000 home purchase deals were completed in August, equivalent to 15.2% of homes under contract that month, according to Redfin. By comparison, the rate was 12.1% a year ago. Redfin notes that the percentage of failed trades has hovered around 15% over the past three months, the highest level on record except for March and April 2020 at the start of the COVID-19 pandemic.
Likewise, homebuilders have reported an increasing number of cancellations, particularly in the Sun Belt area.
The increased cost of finance allows buyers to opt out of agreements because they often do not need to waive contractual contingencies to be competitive. Additionally, Redfin notes that some buyers could renege on their contracts as they wait to see if house prices fall, with mortgage rates hitting their highest level since 2008, significantly hampering buyers’ purchasing power.
“Today house hunters are taking their time and exploring their options, whereas six months ago they had to act fast and pull out all the stops to be competitive because homes were selling almost immediately,” Tzahi said. Arbell, a Las Vegas-based Redfin agent. in a report. “Homebuyers will now agree to buy a house and do the inspection and then walk away because they have found another house they like more.”
Sam Chute, a Miami-based Redfin agent, added: “Some homebuyers are finding that by the time they enter into a contract and lock in their mortgage rates, rates could be much higher than they were when they visited the house and/or got pre-approved. This can kill the deal because the buyer is no longer financially comfortable with the purchase.
Homebuyers were most likely to forgo deals in Sun Belt cities, which were popular homebuying destinations at the height of the pandemic.
In August, about 800 contracts were canceled in Jacksonville, Florida, which equates to 26.1% of homes that were completed that month. The top 10 was completed by Las Vegas (23%), Atlanta (22.6%), Orlando (21.9%), Fort Lauderdale, Florida (21.7%), Phoenix (21.6%), Tampa, Florida (21.5%), Fort Worth, Texas (21.5%), San Antonio (21.1%) and Houston (20.6%).
Las Vegas, Phoenix, Tampa and San Antonio have consistently ranked on Redfin’s list of top migration destinations, while Jacksonville, Las Vegas, Orlando, Phoenix and Tampa are among the coolest real estate markets in the country, according to Redfin. Additionally, San Antonio, Tampa, and Phoenix currently have some of the lowest competition rates in the country.
At the other end of the spectrum, metro areas with the lowest percentage of transaction cancellations included Newark, New Jersey (2.7%), San Francisco (4.2%), Nassau County, New York (6 .1%), New York (7%), Montgomery County, Pennsylvania (7.6%), San Jose, CA (8.2%), Milwaukee (8.9%), Oakland, CA (9.2% ), Boston (10.1%) and Seattle (10.3%).
With the exception of Montgomery County and Milwaukee, Redfin said all of those metro areas saw some of the largest net outflows of potential buyers in July and August.