Is the spring housing market in jeopardy?
In January, US homebuyers canceled purchase agreements at an unprecedented rate. Approximately 14.3% of sales contracts were terminated during the month, an increase from 13.4% in January of the previous year, marking the highest cancelation rate for January since data collection began in 2017, according to a report by Redfin Corp.
Several factors are contributing to buyer hesitation, including elevated mortgage rates, high property prices, and uncertainties stemming from trade tensions and potential federal government spending reductions. Bloomberg reported that this trend raises concerns about the upcoming spring sales season, traditionally a peak period for the housing market.
The National Association of Realtors reported that pending home sales dropped to a record low in January, further highlighting the market’s fragility. Redfin attributes the increase in cancelations to “widespread economic and political uncertainty,” citing issues such as tariffs, layoffs, and changes in federal policies as contributing to an “air of instability”, leading some individuals to reconsider moving.
Regionally, Atlanta experienced the highest cancelation rate at 19.8%, followed by Orlando, Las Vegas, Houston, and Jacksonville, Florida, each with approximately 18%. Redfin notes that rising inventory levels in certain markets may empower buyers to be more selective, with some opting out during inspection periods in hopes of finding better options elsewhere.
Real estate professionals advise that persistence can pay off for determined buyers. Alison Williams, a Redfin agent in Sacramento, California, told Bloomberg that buyers remain engaged even after losing a bidding war. “It’s worth checking in with the listing agent about a week after the house goes under contract,” Williams said. “Twice since the start of the year, I’ve found out the original buyer canceled the contract, and my clients were able to get their offers accepted before the home went back on the market.”
Currently, the average rate on a 30-year fixed mortgage in the US stands at approximately 6.72%, reflecting an increase from the previous month’s average of 6.08%. This uptick follows a period of declining rates in late 2024, when the 30-year fixed rate reached a low of 6.08% in September. Analysts anticipate that mortgage rates will remain in the mid-6% range throughout 2025 and 2026, although these forecasts are subject to change based on economic conditions.
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