Janice R. Andrews
There’s a surge in “nightmare scenarios” in Florida’s real estate market as many buyers pull out of contracts because of affordability concerns. Redfin data shows that in June, almost 21% of contracts for the purchase of homes in key Florida cities including Orlando, Jacksonville, and Tampa were canceled. With a cancellation rate significantly higher than the 15% national average, this is the highest rate in the country.
Miami-based Redfin agent Rafael Corrales blames this increase on general worries about house affordability. “We’re seeing nightmare scenarios where deals are getting cancelled at the last minute for the most minute reasons,” Corrales said. “Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue.”
The problem is made worse by the general increase in housing prices in the US. Redfin reports that house prices increased by an additional 4% in June, hitting a new high of $442,525. The combination of rising borrowing costs and price increases has further discouraged purchasers from entering the market. According to Freddie Mac, the 30-year fixed mortgage rate was 6.7% last week.
Since the epidemic, property prices have significantly increased in Florida in especially, which has increased the frequency of last-minute cancellations. The Sun Belt’s housing market is cooling down as a result of the affordability problem, with areas like Florida and Texas seeing sharp declines in home prices due to a shortage of supply. Florida’s home inventory has increased by as much as 50% over the past year, according to Redfin’s prior study.
Given that house prices in the Sun Belt have been steadily rising since the epidemic, this real estate slump may have wider ramifications. The CEO of Reventure App, Nick Gerli, notes that many apartments are already overpriced and speculates that prices in the area might drop by as much as 15%.
Florida’s home market may continue to experience a high percentage of cancelled purchases as the state struggles with affordability, which would affect both buyers and sellers in the process.
