What's causing buyers to walk away from homes?
The US housing market is facing renewed pressure, with a noticeable uptick in canceled home purchase agreements in May compared to the same period last year. According to data from the National Association of Realtors (NAR), approximately 6% of pending home contracts were canceled in May 2025. This figure represents a slight decline from 7% in April but marks a rise from 5% a year earlier.
The increase in cancellations reflects growing instability in the market, according to a report from Associated Press. May marks the third consecutive month of year-over-year increases in broken purchase agreements.
Complementary data from real estate firm Redfin reported that 14.6% of all pending sales fell out of contract in May, up from 14% the previous year. This is the highest percentage of May cancellations Redfin has recorded since it began tracking the metric in 2017.
Cancellations have been attributed to a range of factors, including buyer financing issues, unfavorable appraisals, job losses, or rising costs, according to Lawrence Yun, NAR’s chief economist.
“Stock market fluctuations, restrained consumer confidence and broader economic and geopolitical uncertainties may be leading to higher-than-normal cancellations rates in recent months,” Yun said.
Affordability pressures persist
The broader housing market continues to struggle under the weight of elevated mortgage rates and rising home prices, which have limited affordability for many buyers. Sales of previously owned homes in May remained at their slowest pace since 2009.
Despite this, NAR noted that pending home sales rose 1.8% from April and were up 1.1% compared to May 2024. However, a snapshot by Redfin covering the four weeks ending June 22 showed pending sales fell 2.3% from the previous year—the sharpest drop in three months.
Outlook revised
In light of these dynamics, economists at mortgage finance firm Fannie Mae revised their forecast for existing home sales in 2025. The group now expects a 2% increase, with 4.14 million existing homes projected to sell, down from an earlier estimate of 4.24 million. They anticipate a more robust rebound in 2026, projecting a 9.5% increase in home sales as mortgage rates ease to around 6.1%.
Pending sales serve as a key indicator of future home sales, as contracts typically take one to two months to close, making the current rise in cancellations a noteworthy red flag for the months ahead.
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