Home buyers are backing out of deals at the highest rate in a year, per BI.

In September, there was a significant increase of 16.6% in monthly pending home sales falling out of a contract, marking the highest rate since October 2022 when mortgage rates surged past 7%.

Buyers are currently displaying a heightened level of caution. They are keen on securing favorable deals, especially in light of the considerable rise in mortgage payments. When they perceive that a deal falls short of their expectations, they are increasingly opting to withdraw from the process, according to Heather Kruayai, a Redfin Premier Agent based in Jacksonville, Florida.

The current real estate market does not favor buyers. Mortgage rates have recently crossed the 8% threshold, and the median home price stands at approximately $412,081. First-time buyers face particular constraints, but even current homeowners looking to relocate are facing challenges, as they may need to relinquish lower interest rates they locked in years ago before the spike in mortgage rates.

In essence, buyers are striving to secure the most advantageous deals available, which raises the likelihood of them withdrawing from transactions if issues arise.

Several factors contribute to transactions falling apart, including soaring insurance premiums and disagreements between buyers and sellers regarding necessary repairs, as explained by Kruayai. Overall, buyers currently have significant leverage, prompting sellers to offer more concessions in order to successfully close deals.

Sellers might be more inclined to close deals due to concerns that home prices may need to decrease in the short term, particularly with mortgage rates at such high levels.

Many homeowners are holding significant home equity, and some are choosing to cash out, even if it means forfeiting their low mortgage rates. There is a fear that home prices may decline if rates remain elevated. Redfin's Chief Economist, Daryl Fairweather, anticipates that rates will remain high for the foreseeable future, but home prices are also expected to stay elevated into the following year. The strained housing supply leads even a slight increase in listings to attract buyers, thereby boosting sales.