DETROIT – The city is experiencing a notable shift in its housing market as home purchase cancellations rise, reflecting a broader national trend away from the frenzied market of recent years.
According to a recent Redfin analysis, Detroit saw nearly 18% of home purchase agreements fall through in July. The national cancellation rate reached 15% in July, marking the highest July rate on record.
“As the market has eased a little bit, we’re starting to see some buyers making some choices to potentially back out before closing,” says Jeanette Schneider, president of RE/MAX Southeastern Michigan.
Several factors are contributing to this trend:
Increased Buyer Choice: With more inventory available, buyers have more options. “Some buyers find a house they like, but then in the next couple of weeks, they find a house they love, and they back away from the first deal,” Schneider said.
Economic Uncertainty: Market skittishness, concerns about job security, and inflation are causing some buyers to hesitate.
First-Time Buyer Hesitation: “First-time buyers, typically a little younger, haven’t been through the process before. It can start to feel financially overwhelming,” Schneider said.
Inspection Issues: Major repairs identified during home inspections can lead to cancellations if sellers are unwilling to negotiate.
Market Conditions Shifting
Local real estate professionals describe the current environment as more balanced compared to the COVID-era market frenzy.
Homes in the Metro Detroit area are now typically sitting on the market for 25 to 35 days, a significant change from recent years, according to realtor Andrew Fox Jr.
“The days of paying [$10,000 to $15,000] and $20,000 over asking price – those things have changed now. Sellers are coming to the table and wanting to negotiate a little bit more to get the deal done,” Fox said.
Signs of Market Activity
Despite the increase in cancellations, there are positive indicators for the market.
Following the Federal Reserve’s recent quarter-point interest rate cut, some areas have seen a 25% uptick in mortgage applications, Fox said.
“This couldn’t be a better time to buy. When you look at so many different programs, you’ve got the down payment assistance programs, and sellers helping to buy down your rate,” Fox said. “It’s actually a phenomenal time to buy”.
Detroit’s Competitive Advantage
Detroit continues to offer significant value compared to other markets.
“Detroit is still one of the most affordable places to live in the country. A home that’s $170,000 here may be upwards of two or $300,000 in other cities,” Fox said.