By Associated Press’s Alex Veiga
Los Angeles (AP) An increase in home purchase agreements that fall through before they are formalized is the most recent indication that the U.S. housing market is having problems.
According to data from the National Association of Realtors, almost 6% of pending house purchase contracts were canceled in May, down from 7% in April but up from 5% in May of the previous year. For the third consecutive month, May has seen an annual rise in the cancellations of pending house transactions.
In May, 14.6% of all pending sales went out of contract, up from 14% in May of the previous year. This was the highest cancellation percentage for the month of May since at least 2017. This information was derived from a separate examination of housing data by Redfin.
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The pattern emphasizes how even homebuyers who are successful in negotiating a price with a seller may have to back out for a variety of reasons, including unforeseen expenses, changes in their credit, job or financial situation, or a low appraisal.
“Higher-than-normal cancellation rates in recent months may be caused by stock market fluctuations, restrained consumer confidence, and broader economic and geopolitical uncertainties,” said Lawrence Yun, chief economist at NAR.
As rising home prices and high mortgage rates continue to push the cost of homeownership well beyond what many would-be purchasers can afford, the U.S. housing industry is still in a sales slump that dates back to 2022.
NAR said Thursday that pending U.S. home sales increased 1.8% from the previous month and 1.1% from May of last year, while sales of previously occupied U.S. homes in May continued to move at the slowest pace since 2009.
When the purchase agreement has been signed but the deal has not yet closed, the home sale is marked as pending. Pending house sales serve as a predictor of future completed home sales because there is typically a one to two month delay between the signing of a contract and the completion of the sale.
Redfin’s view of pending U.S. home sales for the four weeks ending June 22 showed the worst decline in three months, down 2.3% from a year earlier.
This week, economists at mortgage buyer Fannie Mae updated their forecast for current house sales in the United States, pointing to projections that the average 30-year mortgage rate will conclude the year at 6.5%.
Fannie Mae currently projects that current house sales in the United States will increase by 2% to 4.14 million this year. In the past, the economists predicted that 4.24 million residences will be sold. Nevertheless, they predict that in 2026, home sales will increase by 9.5% as a result of mortgage rates falling to 6.1%.
