Emboldened by a historically high housing supply, Texas homebuyers nixed more than one in every six home transactions last month.
The cities that make up the Texas Triangle packed the list of the nation’s top 10 metropolitan areas where buyers backed out of home sale contracts in May, Redfin found. The state’s high housing inventory and permissive contract law undergird the trend, according to industry members.
Fort Worth ranked second nationwide for the highest rate of canceled home contracts last month after 18.1 percent of pending Cowtown sales fell out of contract, according to Redfin. Atlanta, Georgia narrowly leads the country with 18.8 percent of pending sales having been canceled, but Texas metros make up a plurality of the top 10 list, with San Antonio, Dallas and Houston posting between 16.9 percent and 17.8 percent rates of home sale cancellations.
The trend may be due indirectly to Texas contract law, according to Compass agent Matt Haistings and Century 21 Judge Fite broker Jim Fite, who both work in North Texas. The conventional Texas home contract allows buyers an unrestricted right to terminate the deal, a provision which many states lack.
“Buyers get a very inexpensive termination opportunity at no risk,” Fite said.
For a middle-class home, buyers pay a nominal option fee — usually a few hundred dollars — which they forfeit if they decide to cancel the deal.
“Buyers who are wishy-washy will take advantage of that,” Haistings said.
The deeper economic reason, though, is an abundant supply of homes that lets buyers do more window-shopping and less competing.
The supply of available homes in Texas has risen in the past three years to its highest level since the wane of the Great Recession. The state hasn’t yet reached 6 months supply, which is sometimes considered the threshold of a buyer’s market, but it crested past 5 months supply last year for the first time since 2012, according to the Texas Real Estate Research Commission. In May, it hit 5.3 months supply.
“Buyers don’t have to be as committed like during the pandemic, when, if they terminated a contract, they might have to get back and duke it out for another,” Haistings said.
“So buyers don’t always feel extremely committed to the home that they’re contracting on because they see dozens of other homes available, maybe even in the same neighborhood and certainly in the same ZIP code.”
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U.S. cities with most cancelled home sales