A new StreetEasy report released Tuesday, Oct. 18, indicates the share of home sale contracts falling through at a rate of 1.7% in September, the highest level since spring 2020.
According to StreetEasy, these levels haven’t been this high since home buyers were backing out of home sales because of uncertainty surrounding the pandemic.
Signed contracts typically fall through due to the rapid increase in mortgage rates, especially recently.
“In 2022, rapidly rising mortgage rates have not only pushed buyers to the sidelines, but also caused more deals to fall out of contract,” said Kenny Lee, StreetEasy economist. “Buyers with lower budgets, especially first-time buyers, have been hit hardest by the recent whiplash in mortgage rates.”
According to the report, in the first week of October, the 30-year fixed mortgage rate averaged 6.7%.
“This high of a rate is not unprecedented: Between 2006 and 2008, mortgage rates routinely hovered above 6%. However, the speed at which the rate increased this year was unprecedented in recent history,” read the report.
The report also found that buyers with budgets below $800,000 are pulling out more frequently. The cancellation rate in this price range was 2.8% last month, double what it was last year, according to StreetEasy.
Lee believes buyers have the ability to use negotiating power since listings are sitting on the market for longer.
“Queens homebuyers do have a unique opportunity right now. If they are financially prepared for homeownership and find a home they love – it may be the right time to make a move,” Lee said. “With listings sitting on the market for longer compared to this spring, buyers now have less pressure to make a quick offer, and sellers will be more willing to make a deal.”
“Additionally, Queens still offer more cost-effective starter homes than other boroughs,” Lee continued. “First-time buyers can score a larger home in Queens, compared to Manhattan and Brooklyn, with the same budget.”
According to the report, more listings are cutting prices in 2022 as homes have been sitting on the market for longer.
“Close to one in four listings advertised on StreetEasy cut asking prices at least once in Q3 2022, noticeably higher than the one in five in Q3 2021,” said the report. “However, this is not a cause for concern. Buyer demand roared back in 2021, fueled by low interest rates, and more price cuts tend to occur in September when sellers try to get more interest in their listings still on the market from summer. The current share of price cuts is in line with sales market trends prior to the pandemic. Bidding wars with multiple offers above asking will be less common as the market continues to rebalance.”
New York City homes are past their peak, as indicated in the StreetEasy Price Index. In Queens, the index fell 0.8%.