Redfin Reports Record 14% Deal Fall-Through Rate
A new report from Redfin reveals a notable shift in the U.S. housing market, with more than 42,000 home-sale agreements falling through in February alone. This figure represents approximately 13.7% of all homes that went under contract during the month, marking a significant increase from 12.8% in February of the previous year. It also stands as the highest February cancellation rate recorded since 2017, highlighting growing instability in real estate transactions.
The findings are based on an analysis of Multiple Listing Service (MLS) pending-sales data, which tracks homes that have gone under contract but have not yet closed. Because housing activity is highly seasonal, comparisons are made year-over-year for the same month, making February’s spike particularly noteworthy. The data suggests that nearly one in every seven home deals is now being canceled before completion, signaling a shift in market dynamics.
One of the primary drivers behind this trend is the growing imbalance between supply and demand. Across much of the country, there are significantly more sellers than buyers, creating what is often referred to as a buyer’s market. In such conditions, buyers have greater leverage and flexibility. With more options available, they are less likely to feel pressured to move forward with a purchase if concerns arise during the process.
Buyers today are exercising that flexibility in various ways. Many are choosing to walk away from deals during the inspection period, either due to issues uncovered in the property or simply because they find a more appealing alternative. In some cases, even minor defects can become deal-breakers, particularly when buyers know they have other choices. Others may reconsider their financial commitments after further discussions with lenders, especially if monthly payments appear higher than expected.
Juan Castro, a Redfin Premier agent based in Orlando, described the situation as increasingly unpredictable. He noted that some buyers are submitting offers but failing to follow through with deposits, often due to second thoughts or financial uncertainty. In other instances, buyers use inspection findings—no matter how minor—as justification to exit agreements. Aggressive negotiation tactics are also becoming more common, with buyers requesting extensive repairs or upgrades and canceling deals if sellers do not agree.
Economic and geopolitical uncertainty is another factor contributing to the rise in contract cancellations. Many Americans remain concerned about issues such as inflation, job security, and global conflicts, all of which can influence financial confidence. These concerns can make potential buyers hesitant to commit to large purchases like homes, especially when long-term financial stability feels uncertain.
Mortgage rate volatility has further complicated the situation. While some buyers entered contracts when rates were relatively low earlier in the year, fluctuations in interest rates have led to higher borrowing costs by the time they are ready to finalize their loans. This sudden change can significantly impact affordability, prompting some buyers to reconsider or withdraw from their agreements altogether.
The increase in canceled contracts is not uniform across the country. Certain metropolitan areas are experiencing higher rates than others, particularly in regions where buyer-friendly conditions are most pronounced. For example, cities in the southern United States have seen some of the highest cancellation rates. In Tampa, 18.1% of home-purchase agreements fell through in February, the highest among the major metros analyzed. This was closely followed by San Antonio and Atlanta, both at 17.9%, as well as Jacksonville at 17.5% and Fort Worth at 17.3%.
These cities share a common characteristic: a surplus of available homes relative to the number of buyers. In Tampa, for instance, there are roughly 84% more sellers than buyers, while in San Antonio the number of sellers exceeds buyers by more than double. This imbalance gives buyers the confidence to walk away from deals, knowing they can easily find alternative properties.
In contrast, markets with tighter supply conditions are seeing far fewer cancellations. In San Francisco, only 3.7% of deals fell through in February, the lowest rate among the metros studied. Other areas with relatively low cancellation rates include Nassau County at 4.5%, San Jose at 5.4%, Milwaukee at 7.5%, and Oakland at 7.7%.
In these markets, conditions tend to favor sellers, meaning buyers face more competition and fewer options. As a result, they are less likely to back out of contracts, as doing so could mean missing out on limited opportunities. This contrast between buyer’s and seller’s markets underscores how local conditions play a critical role in shaping real estate trends.
Some regions have also experienced notable year-over-year increases in cancellation rates. Los Angeles saw one of the largest jumps, with cancellations rising to 15% in February from 12.1% a year earlier. Other cities with significant increases include Virginia Beach, where the rate climbed to 14.7% from 11.9%, and Boston, which saw an increase to 10.8% from 8.2%.
Additional markets showing rising cancellation rates include Riverside at 16.9%, up from 14.4%, and Baltimore at 13.3%, up from 10.9%. These increases suggest that even in traditionally competitive markets, buyers are becoming more cautious and selective.
Overall, the rise in home-sale cancellations reflects a broader shift in the housing market. With increased inventory, economic uncertainty, and fluctuating mortgage rates, buyers are taking a more measured approach to purchasing decisions. This trend is reshaping the dynamics of real estate transactions, giving buyers greater control while challenging sellers to adapt to changing conditions.
As the market continues to evolve, industry experts will be closely watching whether this trend persists or stabilizes in the coming months. For now, the data highlights a clear message: today’s housing market is defined by cautious buyers, abundant choices, and a growing willingness to walk away from deals that no longer feel right.
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