The number of home buyers canceling their deals rose in June, alongside rising interest rates and fears that there's a recession looming ahead. In June, 16.7% of pending contracts fell through in the Chicago area, according to a July 11 report from Redfin, the online real estate marketplace. In the previous five months, the rate of cancellations ran between 13.1% and 14.1%. Nathan Binkley, a Compass agent based in the West Loop, has his own data on the trend. By this time in 2021, he and his partner and brother, Kevin Binkley, had one deal canceled out of 48. In the same period this year, they’ve had seven cancellations out of 46. That’s 15.2% or about the same as Redfin reported. “Ten years in residential (real estate) in the city and I’ve never seen buyers be this flaky,” Binkley said. “Buyers are entering contracts and then finding the smallest reason to terminate them.”
Baird & Warner agent Jordan Chalmers said buyers may be cooling their jets specifically because the housing market has been so overheated, with multiple offers and selling prices well over the ask. “They may have felt rushed into making a choice,” Chalmers said. “And when they get a chance to sleep on it, they realize they got caught up in the hoopla and the house isn’t worth that price to them.
In the report, Redfin economist Taylor Marr said fast-rising interest rates may be forcing some buyers to drop their contracts. “If rates were at 5% when you made an offer but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home or you may no longer qualify for a loan.” Among Binkley’s recently canceled deals, he said, was one for a Bucktown house priced at about $1.1 million. When the inspection turned up “totally normal inspection issues,” he said, the buyers “got cold feet.” Another deal was for a condo priced at about $600,000. When the buyer, an out-of-town father buying for his college-aged daughter, heard the city was back to a high alert level because of a recent increase in infections, “he backed out because he’s concerned the city will reinstate mandates this fall and his daughter’s college will go virtual again." The response to COVID "has been stop and start for almost three years," Binkley said. "People wonder if the gym down the street will still be open" after their purchase is complete.
Chicago’s cancellation rate is higher than the nation’s. In June, 14.9% of pending contracts failed to close, Redfin reported. At 16.7%, Chicago’s cancellation rate is well below that in some of the nation’s housing markets that have been fizziest during the pandemic boom. Among the nation’s biggest metro areas, Las Vegas had the highest rate of failed contracts in June (27.2%), followed by Phoenix (24.5%) and Tampa (23%).