REDFIN: 14.6% of homes that went under contract in May cancelled - buyers getting cold feet!
The median U.S. home-sale price rose 0.7% year over year in May—the slowest growth since June 2023. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Still, last month's median sale price of $440,997 was the highest of any May in records dating back to 2012.
Redfin recently predicted that home prices will start falling on a year-over-year basis by the end of 2025. That has already happened in 11 of the 50 most populous U.S. metropolitan areas, with Oakland, CA (-6.7%), Jacksonville, FL (-5.2%) and Dallas (-4.6%) leading the declines in May.
Home Price Growth Is Cooling Because Sellers Outnumber Buyers
U.S. home price growth is slowing because there are significantly more home sellers than buyers in today’s market—the result of prohibitively high homebuying costs and economic uncertainty.
Existing-home sales came in at a seasonally adjusted annual rate of 4.21 million in May, the lowest level since October, as mortgage rates remained elevated near 7%. Existing-home sales, overall home sales and pending sales were all little changed from both a month earlier and a year earlier.
Meanwhile, the supply of homes for sale (active listings) hit the highest level since March 2020, rising 0.7% month over month on a seasonally adjusted basis and 16.2% year over year. Active listings are climbing because the mortgage rate lock-in effect is easing, but also because homes are taking longer to sell, causing stale inventory to pile up. The typical home that went under contract in May did so in 38 days—nearly a week longer than a year earlier and the slowest May pace since 2020. This is roughly how long it took homes to sell before the pandemic.
“The market has been shifting in buyers’ favor, but it doesn’t feel that way to many Americans because homebuying costs remain near record highs,” said Redfin Senior Economist Asad Khan. “Buyers may gain more negotiating power in the coming months as more sellers face a tough reality: Sellers no longer hold all the cards.”
Less than one-third (31.2%) of homes that sold in May went for over their asking price, the lowest May share in five years, signaling buyers have already gained some bargaining power.
New Listings Are Losing Steam
While active listings rose in May, new listings fell 2.9% month over month on a seasonally adjusted basis, and rose 2.9% year over year—the slowest annual growth since November.
“We’ve hit a plateau with home prices. A lot of homeowners are considering renting their homes out instead of selling,” said Rob Wittman, a Redfin Premier real estate agent in the Washington, D.C. area. “The buyers who come through on tour these days have little urgency. They’re often browsing instead of buying because they're hoping mortgage rates will come down, even though that's unlikely to happen soon.”
Redfin predicts mortgage rates will remain near 7% for the rest of the year.
Some Home Purchases Are Falling Through as Buyers Get Cold Feet
Roughly 59,000 home-purchase agreements were canceled in May, equal to 14.6% of homes that went under contract that month. That’s the highest May percentage in records dating back to 2017 and is up from 14% a year earlier.
Florida and Texas, which have seen their housing markets slow considerably in recent months, had the highest rate of cancellations among the major metros Redfin analyzed. San Antonio came in first (21.3%), followed by Orlando, FL (20%) and Jacksonville, FL (19.7%).
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