According to a new Redfin analysis, there were 41,000 home-purchase agreement cancelations in January 2025, which was a rise of 13.4% from the previous year, bringing it to a level not seen since 2017.
The housing market has been on shaky ground for some time now, affected by supply issues, high mortgage rates, as well as unaffordable property prices, and now the situation has become even more unstable, with a record number of people backing out of a home purchase. Sam Brinton, a Redfin Premier Agent, touches on this:
“I’m seeing more homebuyers back out of deals than usual, and I’m hearing the same from other agents and mortgage lenders in the area. Some buyers are getting cold feet with everything going on in the world.”
With such a large number of potential buyers turning away from home purchases, the rental real estate sector is in full swing, with investors in certain locations having to create tenant waiting lists.
Related Article: Investors Gain Edge in Market Dominated by Inflation, High Rents and Low Housing Inventory
Factors Behind January’s Home Sales Cancellation Rate Hitting an 8-year Record High
With one in seven sales ending up getting canceled, it certainly leaves room for concern. What’s fueling this homebuyer hesitation? Well, it could be a number of factors.
Redfin provided a statement that points to potential reasons for buyers backing out at this time, as well as sellers not entering the market: “Widespread economic and political uncertainty. Tariffs, layoffs and federal policy changes are among the factors contributing to an air of instability. Some people are choosing to stay put.”
The increased housing supply could also be swaying buyers’ decisions, causing them to leave one deal for a better one. Regarding mortgage rates, January’s average rate hit 6.96%, which was an eight-month high. Such high rates, combined with high purchase prices, can cause financial fear to set in as a potential buyer contemplates the final numbers.
Related Article: Cutting Through Red Tape Bureaucracy to Fix the Affordable Housing Crisis
Although high housing purchase cancelations are being seen throughout the nation, there are certain locations that have been hit harder, as seen below:
- Atlanta, GA: 19.8%
- Orlando, FL: 18.2%
- Las Vegas, NV: 17.9%
- Houston, TX: 17.8%
- Jacksonville, FL: 17.8%
Affordability and Convenience Drive Growth in Rental Market Demand
With the housing market still in crisis mode, many buyers are looking for alternative home options, and they’re finding them in rental properties. Although rents have increased along with home prices, a rental still offers a much easier entry point for a family looking for a place to call home.
Related Article: Report States Renting More Affordable Than Buying Indicating Financial Security for Investors
Because of this, the demand for rentals has been through the roof, placing real estate investors in a profitable situation. Demetrio De Souza, a real estate expert and entrepreneur, comments on this:
“As an experienced real estate specialist and investor, I have observed that while prospective homeowners grapple with higher borrowing costs, investors with capital to deploy in rental properties are well-positioned to capitalize on the current environment.” He continues by stating, “Historically, real estate stands out as one of the least volatile and most secure asset classes. “
The Current Instability of the Housing Market has Opened Doors for Investor Gains
Although many individuals across the U.S. have been negatively impacted by the current housing crisis, real estate investors are coming out on top. With housing purchase cancelations at an all-time high, along with buyers and sellers holding out for lower rates, rentals are an attractive option. Along with this, rental rates have risen over the past few years and are continuing to rise, keeping profits up for investors.
Related Article: The Driving Factors Behind the Ability to Charge Higher Rental Rates
If you’re not currently holding a rental property but would like to, we can help. We’re a full-service investment company that provides built-to-rent properties. You can contact Morris Invest for details on how we can set you on the path to financial independence through rental real estate.
Don’t Wait Until Rates Lower to Invest – You Can Always Refinance Later
Before we wrap things up here, it’s worth mentioning that if you’re waiting for rates to lower or home prices to drop to start investing, you’ll end up paying more in the long run and also lose out on equity. Why? Because home prices are not coming down any time soon, and mortgage rates are unpredictable at this time.
If you invest now, you’ll get in before prices rise and you’ll start building equity immediately. Also, if mortgage rates are a key factor for you, know that you can always refinance when rates do lower.
If you have any questions regarding the housing market or you would like details on our available new construction rental properties, feel free to reach out to a team member at Morris Invest.
Dive into the following video that covers a related topic – The Affordable Housing Crisis: How Real Estate Investing Can Help:
