Home purchases canceled at record pace in October

Mortgage rates that topped 7% by the end of October led to records set for home purchase deal cancellations and seller price cuts, according to Redfin.

The average interest rate for the full month was 6.9%, 383 basis points higher than it was for October 2021. As a result, almost 60,000 home-purchase agreements were terminated. That works out to a record 17.9% of homes that entered into a sales contract. Meanwhile, 23.9% of homes for sale experienced a price drop, double the rate of a year earlier, Redfin said.

Pending home sales were off 32.1% on a year-over-year basis, the largest decline since Redfin started keeping records in 2013.

Higher interest rates also discouraged potential sellers from listing their properties, with a 24% annual decline, the second steepest drop on record; the only month with a larger year-over-year reduction was April 2020, the first full month of pandemic-related shutdowns.

Sales prices remain elevated, even with a month-to-month drop in October of 1.4%, to $397,549. But that is still 4.9% higher compared with October 2021.

On the other hand, a home was on the market a median of 35 days, up 3 days from September and 14 days versus one year ago.

At the same time, 44.6% of homes sold by Redfin agents had more than one bid, down 2.4 percentage points on a month-to-month basis and 22.7 percentage points one year prior.

But the picture isn't entirely bleak.

"There are already early but promising signs that inflation is cooling, which caused mortgage rates to drop last week," said Chen Zhao, Redfin's economics research lead, in a press release. "If that progress continues, buyers who recently backed out of deals may return to the market and sellers may be less inclined to slash their prices."