Homebuyers are backing out of purchase contracts at the fastest pace in more than two years as they confront rising interest rates and the possibility of an impending recession.
Former Fannie Mae executive Tim Rood provides an overview of the housing market after August homebuilder sentiment plunged on"Cavuto: Coast to Coast."
About 63,000 home purchase agreements were called off in July, equal to 16% of homes that went into contract that month, according to a new analysis by Redfin. That is up from 15% of deals that collapsed in June and is the highest rate in more than two years.There are two reasons for the increase in cancellations. Homes are sitting on the market longer, giving buyers more power to demand repairs, concessions and other contingencies.
Homebuyers are also worried about the increasingly dark economic outlook as the Federal Reserve moves to tighten rates at the fastest pace in decades,"Buyers are also skittish because they’re afraid a potential recession could cause home prices to drop," Kruayai said. "They don’t want to end up in a situation where they purchase a home, and it’s worth $200,000 less in two years, so some are opting to wait in hopes of buying when prices are lower.
Newly finished development of homes for sale, built by home builder KB Home, are pictured in Carlsbad, California, on Jan. 4, 2011.
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