Home sales face highest cancellation rate since pandemic start, Asking Rents show smallest increase: Redfin

syahrir maulana

• As per a latest Redfin survey, ~60K home-purchase agreements dropped through in June which is equal to 14.9% of homes that went under contract compared to 12.7% in May and 11.2% in June 2021.

• This is the highest percentage since March and April 2020 when the housing market was at a standstill amid the pandemic.
• "Rising mortgage rates are also forcing some buyers to cancel home purchases. If rates were at 5% when you made an offer, but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home or you may no longer qualify for a loan," Redfin Deputy Chief Economist Taylor Marr commented.
• With the Fed raising interest rates for curbing inflation, the housing market cooled down thereby enabling home buyers to seek concessions from sellers despite higher rates making it less affordable.
• In the latest week, mortgage rates dropped to 5.3% marking it the highest one-week drop since 2008.
• "While the drop provides minor relief to buyers, the housing market will continue to normalize if home price growth materially slows due to the combination of low housing affordability and an expected economic slowdown," Chief economist Sam Khater commented.
• Separately, it was known in mid-June 2022, nationwide, 57.8% of home offers written by Redfin agents faced competition on a seasonally adjusted basis in May, the lowest level since February 2021; it is compared to revised rate of 60.9% in prior month and a pandemic peak of 68.8% one year earlier.
• This also marks the fourth-consecutive monthly decline.
• Quick look at metro area bidding-war rates:

• Also, a Redfin report indicates June national median asking rent rising 14% from a year earlier, smallest annual increase since October; asking rents were up 0.7% from May, smallest M/M gain since starts of the year.
• "This slowdown in rent increases is likely to continue, however rents are still climbing at unprecedented rates in strong job markets like New York and Seattle and in areas like San Antonio and Austin that soared in popularity during the pandemic," Redfin chief economist Daryl Fairweather commented.
• Homebuilders to watch: (DHI), (KBH), (PHM), (TOL), (LEN)
• ETFs: (XHB), (REM), (REZ), (HOMZ),

Comments

[OverTheHorizon]

FED doing it’s job:

www.cnbc.com/...

[Alohatoyou]

Prudent home buyers lock in their interest rates for a 30 to 45 day period. I suspect many of these folks are walking away for other reasons. Buyers remorse and fear are alive and well. I remember my first house in the 80s carried a 14 percent rate. Hopefully we don’t see those kind of rates.
Thanks

[OverTheHorizon]

@weballoon cancellations:

www.gobankingrates.com/...

[Illuminati Investments]

If "buyers" can't afford the rate rising from 5% to 5.8% then they have no business buying that house.

[drizzlechan]

@Illuminati Investments Uh yeah that's the point dude, a higher interest rate yields a higher mortgage payment which can be beyond peoples affordable range. Any other brilliant financial insights you wish to share mr buffet lol

[0xfc]

@drizzlechan I think his point was that even with a 5% mortgage rate on some unknown amount they were already cutting it too close let alone 5.8%.

On a 300,000 dollar mortgage we are talking about 150ish dollars per month more. If that stops them things were already way too tight. They need to find a place that costs less period. Even at 5% they are leaving very little room for error like a spouse getting laid off if they both work, illness, inflation of energy/food, etc..

[agsserv]

@drizzlechan illuminai's point is well taken.

[MoneyPig]

Congress really trashed the economy, that is all I can say. Congress went around the Treasury, The Federal Reserve and the banking system and gave money directly to everybody and turned the IRS into a monthly check writer.

There is no bottom to stocks, bonds or housing. Prices are going to fall. And then they will start taking about deflation risk and the need to pump out yet more money.

[PanicFirst]

@MoneyPig The stupidest is governments wanting to send out more checks because of inflation...

[Joe de Mencia]

@MoneyPig those stimulus checks were but a drop of the overall liquidity that was pumped in. big guys cashed in (like they always do) while plebs got some measly handouts.

[agsserv]

@MoneyPig Add Biden with Congress, wih the Dem Congress.

[0xfc]

Almost every house being listed in the last 30 to 60 days are now having their asking price lowered. It is funny to see them drop it 10K when it will have to drop at least 100K to move anytime soon.

Think about it. Someone buys a house for 330K in 2018-2019. Redoes the kitchen in splendid home depot style (sarcasm), paints the walls, hardwood floors get refinished, redo the bathrooms a bit (once again home depot quality), no central AC and now expects a 10K price cut to 570K to sell?

Give me a break. They want 300 dollars per sq foot for the home on a 10,000 sq ft lot in an old cow town a solid 40 plus minutes from downtown Boston.

[superartus]

@0xfc yeah it's crazy. In my area in California, we had 900sqft homes averaging about 600k in 2019. Then in 2021, they were averaging about 1mil. Today, they are trying to sell at 25 to 75k off. Good luck to them.

[Mike2021]

Look at Home Price to Income Ratio, literally off the charts

www.longtermtrends.net/...

Sad fact is home prices have actually kept increasing, because supply is so low.

[JeffSizemore]

@Mike2021 not just that there are more people entering the us. Housing/rent are going to be high forever. Just may alone over a quarter million. Over 1.5 million and last year 1.7m. They all need housing. We aren’t building enough to house all these people. I expect rent and house prices to eventually price out everyone but the rich

www.cbp.gov/...

[MoneyPig]

@JeffSizemore

Only 400k will enter the workforce next year. Check it out. Labor growth rate is plummeting. That is why unemployment is so low.

[User 49463880]

Boohoo. People are literally trying to sell houses- double the value or even triple the value in the span of pre covid versus post covid.

[jasmine4657]

let the home price keep dropping. it never deserved that ultra high price. Let everything in the market have fair price before we can call the end of carnage.

[DoubleBacon]

@AppleTree666 why don't you think a “fair price” is determined between willing buyer and willing seller?

[Gerrymander]

@AppleTree666 actually, whatever someone is willing to pay is fair market price. Just sayin.

[jasmine4657]

@DoubleBacon sure you can consider whatever price that is determined
between willing buyer and willing seller is fair. Hopefully you didn't buy those bubble stocks near end of 2021 when they were also
determined between willing buyer and willing seller..

[Diesel]

Looks like inflation is dying.

[yhoomajor]

Everyone has become a landlord over last few years. People have overextended themselves buying 2-3 houses.

[CaptainCapitalist]

15% correction in home prices will be inevitable, wish pricing days by sellers are over but a housing crash is also unlikely.

[Who Moved My Cheese]

@CaptainCapitalist Foreclosures from the FOMO buyers who bought in at top prices will be coming soon. Especially as layoffs increase. CC debt will also be a major problem in the coming months.

[PanicFirst]

@Mlon Eusk CC debt is looking like it is already maxed...

[Dividend Seeker]

I was surprised to see 10-11% for a year ago. Seemed high, I suppose I under-estimated how many contracts fall apart.