Pending Home Sales Are Falling Through as Buyers Regain Bargaining Power

The share of contract cancellations is on the rise as buyers continue to grapple with affordability challenges in the nation’s hottest housing markets, Zillow reports. The share of pending home sales that fell through rose by 0.8 percentage points at the end of August from the beginning of the year, meaning that roughly one of every 36 pending sales was canceled in the final week of August, but that rising share is still in line with pre-pandemic norms.

Rising mortgage rates are forcing a growing number of buyers to pull out of contracts for homes that they were able to afford at the start of the year, and other house hunters are canceling contracts as they regain bargaining power and become more picky in a balancing market.

Regardless of why a deal failed to close, the recent increase in this dynamic is yet more evidence of how the housing market has quickly shifted in recent months. And more evidence that perhaps well-off buyers are really able to be more choosy in this market now that competition is less of a concern, and are less keen to jump on a home simply because it’s available.

The 80-basis-point increase in the share of pending sales that fall through is a significant shift, but the share of pending sales that don’t result in a sale remains within pre-pandemic norms. In the years preceding the COVID-19 pandemic, the weekly rate at which pending sales fell through was generally around 2.5%, in line with what the market is seeing now. What’s more, the share of pending fall throughs has recently shown signs of stabilizing.

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