Homebuyers are backing away from contracts in the Sun Belt, especially in Las Vegas, Phoenix, Tampa and Texas

A year ago, only 12.1% of home buyers backed out of deals. Typically, 12% of deals fell through before the pandemic, Redfin said. But the last time this number rose ̵[ads1]1; before this autumn – was at the beginning of the coronavirus pandemic in March/April 2020.

Buyers were most likely to back out of deals in the Sun Belt, the company added, in cities such as Phoenix, Tampa and Las Vegas. Buyers were least likely to back out of purchases in big cities, including San Francisco and New York.

“A slowing housing market allows buyers to renege on deals because it often means they don’t have to waive key contract terms to compete as they did during last year’s home buying frenzy,” noted Redfin.

Conditions may include inspections to see if there are any problems with the home, or if they can get the required mortgage, or if the appraisal is different from the agreed amount.

And “some buyers may also back out of deals because they are waiting to see if home prices fall,” the company added.

More than a quarter of buyers looking to buy a home in Jacksonville, Fla., moved back in August, Redfin said, the highest percentage among the major 50 U.S. metro areas, followed by Las Vegas, Atlanta and Orlando. (Top 10 list below)

These destinations were hotspots during the pandemic for buyers as they were affordable and in an era of telecommuting.

But that has changed.

“Sun Belt cities including Phoenix, Tampa and Las Vegas attracted many house hunters during the pandemic, driving up home prices,” Redfin said.

“Now their housing markets are among the fastest cooling in the country, giving buyers the flexibility to flex,” they added.

Redfin analyzed data from Multiple Listing Services going back to 2017 to analyze the churn.

The percentage of buyers walking out of deals was lowest in Newark, NJ, at 2.7%, followed by San Francisco, Nassau County, NY, New York City and Montgomery County, Pa.

A big reason for the cancellations is high prices. The 30-year is at 6.29% as of 15 September. That’s up from 2.88% a year ago.

Housing is also still expensive. While existing home prices are falling, the median price of an existing home in the U.S. remained $389,500 in August, up 7.7% from a year earlier, the National Association of Realtors said.

Against this tough backdrop of nervous buyers, “I advise sellers to price their homes competitively based on the current market,” said Sam Chute, a Miami-based realtor with Redfin, “because deals are falling through and buyers are no longer willing to pay pie-in-the-sky prices.”

To be clear, the indigestion in the real estate market was deliberately engineered: home prices falling as a result of higher prices and sellers responding to lower demand is a “good thing,” Federal Reserve Chairman Jerome Powell said during a news conference Wednesday. when they announced the rate hikes.

“Home prices were rising at an unsustainably fast level,” Powell said.

“In the longer term, we need supply and demand to be better aligned, so that house prices go up to a reasonable level … and people can afford houses again,” he added. “The housing market may have to go through a correction to get back to that place.”

These are the top 10 cities where deals are coming in:

Do you have thoughts about the housing market? Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com