Tens of thousands of proposed home purchases nationwide did not go through in March.
based on a recent report from Redfin
As increasing economic instability is causing numerous potential purchasers to question whether they should make such a significant investment.
Why It Matters
Expensive home costs in the U.S. property market was among the leading concerns for American voters heading into the 2024 presidential election.
President
Donald Trump
operated on the pledge to reduce housing costs and increase essential stock. However, numerous specialists and detractors have cautioned that his economic strategies—which include substantial tariffs on international trade allies and large-scale deportations of immigrants—might lead to an increased cost of living for U.S. citizens and potentially drive the nation toward a recession.
In periods of economic decline, the demand for housing typically decreases because prospective purchasers encounter reduced job opportunities and the threat of possible layoffs, leading them to become more cautious about purchasing, despite being eligible for a loan.
What To Know
Based on Redfin statistics, around 52,000 purchase contracts were terminated in March, which represents approximately 13.4 percent of the homes sold during that month.
This marks the third highest cancellation rate for March home sales since 2017, when the real estate brokerage began tracking this information. The rates were higher only in March 2023 (13.7 percent) and March 2020 (16.4 percent).
Last month saw the peak rates of pending home sales failing to close primarily in areas of the country that witnessed a real estate surge during the COVID-19 pandemic. Cities in Florida and Texas led the chart for the highest number of canceled transactions among the top ten listings.
In Orlando, Florida, the highest percentage of pending sales that did not close was 18.7%. Fort Worth, Texas, came second with 18.4%. Other metropolitan areas in the top ten included San Antonio (18.1%), Las Vegas (18.0%), Miami (17.9%), Tampa, Florida (17.7%), Fort Lauderdale, Florida (17.5%), Atlanta (17.3%), Jacksonville, Florida (17.1%), and Riverside, California (16.4%).
Over the last few years, Florida and Texas have constructed the most new residences among all states in the Union. However, these regions are currently experiencing an increase in unsold properties due to escalating home prices and record-high mortgage rates, which deter prospective purchasers.
The same trends are causing purchasers nationwide to hesitate before finalizing their decisions, as the availability of homes has surged to a five-year peak, compelling sellers to provide various incentives to close transactions. Such incentives, serving to reduce the expense of purchasing a property, may encompass funds for renovations, assistance with closing expenses, or reductions in mortgage rates.
Based on data from Redfin, 44.4 percent of U.S. home sellers provided incentives to buyers during the initial three months of this year, an increase from 39.3 percent in the same period last year, nearly reaching the peak level of 45.1 percent recorded at the beginning of 2023.
In March, Seattle had the largest percentage of sellers providing incentives, accounting for 71.3% of all home sales in the initial quarter. This was succeeded by Portland, Oregon, which saw 63.9%, Atlanta with 61.5%, San Diego at 60.7%, Denver at 59.2%, and Los Angeles at 56.1%.
What People Are Saying
Chaley McVay, a
Redfin Premier
real estate agent in
Portland, O
regon,
said
in a statement:
Previously, buyers would request allowances for minor expenses such as repairs. Nowadays, they negotiate these allowances to help them manage the overall cost of purchasing a home. Many sellers are now providing funds for reducing mortgage rates, and just last week, I encountered a case where a seller agreed to pay seven months’ worth of HOA dues for the buyer.
He commented, “Vendors are experiencing anxiety since many purchased during the peak of the market back in 2021 and 2022, only to find themselves having to repurchase with increased interest rates on mortgages. This concern over final earnings is driving me to advise buyers to seek closing cost credits rather than reductions in the purchase price—this approach benefits both parties as it allows the buyer some relief without forcing the seller beneath their desired sales figure.”
Stephanie Kastner, a Redfin top-tier real estate agent at
Seattle
, said:
Seller concessions are very typical for condo sales and newly built townhouses, but they occur less frequently for standalone family homes unless those houses have remained unsold for an extended period.
She stated, “Due to soaring HOA fees and insurance costs, condos have become more difficult to market. In an effort to maintain higher selling prices, developers are providing incentives. They are covering buyers’ closing expenses and might even include a complimentary washer-dryer if doing so prevents them from having to lower the asking price.”
Redfin Economic Leader Chen Zhao
said
in a statement:
The betting markets indicate more than a 50% chance of a recession, causing individuals to be cautious about investing large sums of money into properties or vehicles.
She went on, “People are being more cautious with their spending due to legitimate concerns over employment stability and rising costs of basic necessities. For those looking to buy homes, there might be positive aspects ahead: decreased demand may lead to stable or declining house prices, and there’s also a possibility that mortgage interest rates could decrease in the coming months.”
What Happens Next
It is not clear how the Trump administration’s tariffs will affect global trade and the U.S. economy. If the country should enter a recession this year, demand for housing is likely to slow down significantly.
A recent survey
A study carried out by Redfin indicates that Americans are contemplating postponing significant life choices such as purchasing a house until circumstances get better.
Approximately one out of every four Americans informed the real estate firm that they have decided to revoke their intentions to make significant purchases this year, such as purchasing a house or automobile, due to Trump’s tariffs. Meanwhile, 55 percent stated that they are significantly less inclined to proceed with these purchases.
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