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LOS ANGELES (AP) — The latest sign of trouble in the U.S. housing market: A pickup in home purchase agreements falling through before they’re finalized.
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Some 6% of pending contracts to buy a home were canceled in May, down from 7% in April, but up from 5% in May last year, according to data from National Association of Realtors. May is the third consecutive month with an annual increase in pending home sales cancelations.
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A separate analysis of housing data by Redfin found that 14.6% of all pending sales in May fell out of contract, up from 14% in May last year, and the highest cancelation percentage for the month of May going back to at least 2017.
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The trend underscores how even home shoppers who manage to ink a deal with a seller can end up having to back out because of unexpected costs, changes in their credit, employment or financial status, or a low appraisal, among other reasons.
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“Stock market fluctuations, restrained consumer confidence and broader economic and geopolitical uncertainties may be leading to higher-than-normal cancellations rates in recent months,” said Lawrence Yun, NAR’s chief economist.
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The U.S. housing market remains in a sales slump going back to 2022, as elevated mortgage rates and rising home prices nationally keep pushing the cost of homeownership well beyond what many would-be homebuyers can afford.
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While sales of previously occupied U.S. homes in May remained at the slowest pace since 2009, pending U.S. home sales rose 1.8% from the previous month and increased 1.1% from May last year, NAR said Thursday.
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A home sale is listed as pending when the purchase contract has been signed but the transaction has not closed. There’s usually a month or two lag between a contract signing and when the sale is finalized, which makes pending home sales a bellwether for future completed home sales.
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A snapshot by Redfin of pending U.S. home sales for the four weeks that ended June 22, shows they fell 2.3% from a year earlier, the biggest drop in three months.
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Economists at mortgage buyer Fannie Mae revised their outlook for existing U.S. home sales this week, citing expectations that the average rate on a 30-year mortgage will end this year at 6.5%.
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Fannie Mae now expects existing U.S. home sales will rise 2% this year to 4.14 million. The economists’ previously forecast the sale of 4.24 million homes. Still, they project home sales will jump 9.5% in 2026 on the back of mortgage rates easing to 6.1%.
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