Buyers back out of home-sale deals at record rate in January

Sellers significantly outnumbering buyers in the market and economic uncertainty have caused a record number of home sales to fall through, a new industry report found.

Nearly 40,000 home-sale agreements were cancelled in January, according to a Redfin analysis of pending sales data. That's 13.7% of homes that went under contract in the United States, up 13.1% from the same month last year and the highest January share in records dating back to 2017.

Home sales folded largely because the market heavily favored buyers. There were an estimated 44%, or 600,000, more sellers than buyers in the housing market last month, up from 30% more a year ago, a separate Redfin report found. This gives negotiating power to buyers, who may pull out of the deal during the inspection period if they see a home they like better, an inspection issue arises or they get cold feet, Redfin said.

"More buyers are backing out," said Alin Glogovicean, a Redfin Premier agent in Los Angeles, in a press release Tuesday. "They're second-guessing the wisdom of making a huge purchase when there's a fear in the back of their mind about the state of the economy and the uncertainty of their finances. That's particularly true when they're first-time buyers who don't have equity from a previous home sale, and they're using most or all of their savings on a down payment."

Economic uncertainty is another reason deals were cancelled. While home-price growth has flattened, housing costs are still at historic highs, minimizing affordability gains. Some potential buyers backed out because they were anxious about layoffs, tariffs and geopolitical tensions, the release said.

Which cities had the highest cancellation rates?

More than 21% of home-purchase agreements were cancelled in San Antonio last month, the highest share of the 47 major metros Redfin studied. Atlanta (18.5%), Cleveland (17.9%), Riverside, California (17.5%), and Orlando, Florida (17.3%), followed suit.

These cities led the country largely because they were buyer's markets, as there were twice as many sellers in San Antonio and 80% more in Atlanta.

Coastal California markets were some of the hottest entering the new year, and their cancellation rates reflected that. San Francisco posted the lowest rate of the 47 metros at 3.5%, while Nassau County, New York (4.8%), San Jose, California (5.3%), Milwaukee (7.6%) and Oakland, California (8.4%), rounded out the bottom five.

Contract cancellations also increased most in San Antonio, rising from 15.6% last year. Cleveland and San Jose saw significant jumps as well, increasing 3.0 and 2.4 percentage points, respectively.

Cancellations fell in 11 of the metros analyzed, with Tampa, Florida, Milwaukee and Nassau County each seeing near-two-percentage-point drops.