U.S. homebuyers are walking away from contracts at a record rate. But it’s a different story in the Philly area.
Unlike many real estate markets across the country, the Philadelphia area still favors home sellers, and buyers are competing over a short supply of homes for sale.
Homebuyers are backing out of deals more often, thanks to high prices, economic uncertainty, and having more homes to choose from.
Nationwide, 58,000 agreements to purchase homes were canceled last month. That’s equal to more than 15% of the homes that went under contract in July, which is the highest rate for July in records that go back to 2017, according to Redfin.
But in the Philadelphia region, cancellations were rarer.
The market that Redfin describes as Montgomery, Bucks, and Chester Counties was one of the regions where home purchases were least likely to fall through, according to Redfin’s analysis of 44 large metropolitan areas.
An equivalent of 8.2% of homes that went under contract in July in this region were canceled last month. Only Nassau County, N.Y., on Long Island had a lower rate of cancellations last month — 5.1%.
In July, the Montgomery County region was the third-strongest seller’s market of the 50 most-populous metro areas that Redfin analyzed.
And the market Redfin describes as Philadelphia and Delaware Counties had one of the biggest drops in cancellations compared to the same time last year. Cancellations were down by more than 1 percentage point, hitting 11.6% last month.
The region was one of 11 metro areas where cancellations fell.
Tabitha Heit, a real estate agent with Berkshire Hathaway HomeServices Fox & Roach, Realtors who works throughout the five-county Philadelphia area, said only a few of her buyers pulled out of deals this year.
Unlike many markets across the country, the Philadelphia region continues to favor sellers. Local buyers are still competing to get their offers accepted, so once they win a bid, they don’t want to let go of the property.
“The market has been still incredibly tight, especially in the Philadelphia suburbs,” said Heit, founder of the Heit Homes Group. “There’s still too many buyers for not enough homes.”
Her buyers who pulled out of their contracts did so because of unpleasant surprises during home inspections, she said. One first-time homebuyer walked away from a Bucks County home because of structural problems.
“We went years with very few inspections,” Heit said. “Now that the market’s balanced out more, we’re doing more inspections,” which can mean some deals fall through.
Even if a buyer wants to go ahead with purchasing a property with problems, their lender might not be willing to give them a loan, and the buyer has to pull out of a deal.
Sellers in the Philadelphia area know they have the upper hand and can sometimes risk refusing to fix issues. Heit’s clients found other homes to buy, and the sellers of the properties they walked away from found other buyers.
According to Redfin, home purchases are most likely to fall through in Texas and Florida, which have been building more homes than anywhere else in the country. Buyers know they have options.