Homes in the Sun Belt are losing their appeal to buyers

The Sun Belt region, which extends from Florida to California, became extremely popular among homebuyers in the early days of the pandemic. Newcomers, who had the opportunity to work from home, have moved here from densely populated and high-cost cities such as New York and San Francisco. 

Almost two years later, homebuyers in the Sun Belt cities are backing out of deals at a higher rate than anywhere else in the county, according to a new report from Redfin. Nationally, more than 15 percent of home purchase agreements fell through in August. This is one of the highest rates of canceled contracts on record. Normally, this rate sits at around 12 percent. 

Jacksonville, Florida, saw the biggest number of contract cancellations last month. Potential buyers called off 800 contracts, which is about 26.1 percent of all home purchase deals that took place in August. Las Vegas saw the second highest cancellation rate, with 23 percent of buyers backing out of agreements. Atlanta rounded up the top three list. In this city, 22.6 percent of homes fell out of contract. 

“House hunters today are taking their time and exploring their options, whereas six months ago, they had to act quickly and pull out every stop to compete because homes were selling almost immediately,” Tzahi Arbeli, a Redfin real estate agent, wrote in the report. “Homebuyers now will agree to buy a house and be doing the inspection, and then back out because they found another home they love more.”

By contrast, large coastal cities like New York and San Francisco saw some of the lowest cancellation rates across the country. Only 2.7 percent of buyers decided to cancel their plans to purchase a home in Newark, New Jersey. Other metros with the lowest share of canceled contracts include San Francisco (4.2 percent), Nassau County, NY (6.1 percent), and New York (7 percent). 

As the housing market cools off, more buyers prefer to take their time and tour different homes before making a final offer. The rising borrowing costs also have an impact on homebuyers’ decisions. Some people prefer to exit the sales market and wait out high mortgage rates. 

Resources:

“Sun Belt Homebuyers Are Backing Out of Purchases at a Higher Rate Than Anywhere Else in the U.S.” by Lily Katz and Sheharyar Bokhari (Redfin, 2022)

“Cooling Sun Belt markets lead canceled home contracts,” by Holden Walter-Warner (The Real Deal, 2022)

“Homebuyers are backing out of deals at record-high rates in these 10 U.S. cities,” by Mike Winters (CNBC, 2022)