Southern California Residential Sales Cancellations Continue

For the second month in a row, home sale cancellations in Southern California were higher than they were a year ago.

In May, 2,261 home sales in Southern California fell apart, totaling 15.6 percent of all transactions in the region, the Orange County Register reported, citing Redfin data. That followed a 16.5 percent cancellation rate in April. By comparison, home sale cancellations in April and May of last year were about 15 percent.

A slumping residential real estate market could be to blame for the “dramatic increase in buyer cancellations,” according to Coldwell Banker broker Tom Pelton.

“Gone are the days when a buyer had to buy now before prices went up,” Pelton told the Register. “Now, a buyer can easily decide to wait to buy and not miss out, or cancel an escrow and find something better later.”

The rise in failed home transactions comes amid a plateau in home prices in the region. In Orange, Riverside and San Diego counties, home prices dropped in May for the first time in two years, per Redfin. That makes it the lowest level for the month of May since the pandemic.

At the same time, sales prices are often at or near record highs, and the sky-high prices and mortgage rates lead some buyers to stand back and wait or “change their minds at the eleventh hour.”

The cancelled sales deals in SoCal mirror a nationwide trend. The National Association of Realtors reported that cancellation rates across the country were up from the year before in March, April and May.

“Stock market fluctuations, restrained consumer confidence and broader economic and geopolitical uncertainties may be leading to higher-than-normal cancellations rates in recent months,” NAR chief economist Lawrence Yun told The Associated Press.

As a result, “Some house hunters are backing out during the inspection period because a better house has or might come along,” Redfin said last month of the current “buyer’s market.”

Simply put, “In just about every transaction, buyers have one foot out the door,” Huntington Beach-based agent Terry McCarty told the Register, saying “buyers simply walk” if they face any pushback from sellers. “Many sellers have buried their heads in the sand and refuse to accept the reality that you need to work with buyers and oftentimes concede on things like repair requests and undervalued appraisals.”

— Chris Malone Méndez