❗Let's close the gap: We still need your help to raise $40,000 by April 1. Donate now

Signs of a cooling housing market: The return of contract contingencies

Samantha Fields Jul 13, 2022
Heard on:
HTML EMBED:
COPY
The contingencies allow prospective home buyers to back out of a sale. Stephen Brashear/Getty Images for Redfin

Signs of a cooling housing market: The return of contract contingencies

Samantha Fields Jul 13, 2022
Heard on:
The contingencies allow prospective home buyers to back out of a sale. Stephen Brashear/Getty Images for Redfin
HTML EMBED:
COPY

In another sign that the housing market is cooling, nearly 15% of home sales fell through last month, according to a new analysis from Redfin – the highest that number’s been since the early days of the pandemic.

The housing market has been so frenzied for the last couple of years, that it became common for prospective buyers to waive things like home inspections.

But Moira Holley, a broker in Seattle said now mortgage rates are up and fewer people are looking so, “inspections are back. And in some cases … financing contingencies” – which let a buyer pull out of a sale if they can’t get a loan. 

Daryl Fairweather at Redfin said more buyers had financing contingencies in June than in January.

“And that means that if the mortgage rate went up, they could go to the seller and say, ‘I can’t afford this home’ … and they will be let out without penalty,” she said.

She said that’s likely a big part of the reason more sales fell through last month. 

Ali Wolf at housing data and consultancy firm Zonda said some especially hot markets in the Mountain West, Southeast and Southwest are cooling the fastest.

“What we’re seeing in some of these markets is consumers do, in fact, have a price ceiling,” she said.

Now that record home prices are colliding with higher mortgage rates, a lot of would-be buyers have hit that ceiling. 

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.