American home purchases are getting canceled at the highest rate since 2022, with one expert saying many are 'nightmare scenarios' — alternative ways you can still invest in US real estate
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Buyers are backing out of home purchase deals at a record rate — but real estate agents say deals are falling through on flimsy grounds.
“We’re seeing nightmare scenarios where deals are getting canceled at the last minute for the most minute reasons,” said Rafael Corrales, a Redfin Premier agent in Miami, where about 2,500 home purchases were canceled in June (or 17.6% of homes that went under contract).
However, Corrales explains there’s a big problem that’s giving many other buyers cold feet.
“Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue.”
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This trend continued through the summer with nearly 60,000 home-purchase agreements canceled in August.
Why is this happening? And how can you invest in real estate without dealing with the stress of buying and managing a property?
Home purchases getting canceled at a record rate
A recent Redfin report reveals that across the US, around 56,000 home purchases fell through last June — or, nearly 15% of homes that went under contract — marking the highest percentage of any June on record.
“Buyers are getting more and more selective,” said Julie Zubiate, a Redfin Premier real estate agent in the San Francisco Bay Area.
“They’re backing out due to minor issues because the monthly costs associated with buying a home today are just too high to rationalize not getting everything on their must-have list.”
August had the highest number of cancellations since October 2022, when mortgage rates surpassed 7% for the first time in two decades.
Some are also considering waiting it out a little longer in the hopes that the key rate could fall in September — even though policymakers just voted to hold it steady in July — and ease some of their affordability concerns.
Alternatives to buying a home
So what’s an investor to do? Thankfully, there are crowdfunding platforms that take an alternative approach by allowing you to invest directly in owner-occupied residential properties — with no home purchase necessary.
Cityfunds is a platform that allows you to own a share of owner-occupied residential properties in booming U.S. cities – including Los Angeles, Miami, Nashville, Denver and Dallas.
Cityfunds secures an interest in the home's future value, and as the home value appreciates, so does the value of the Cityfunds investment. You can invest in portfolios of these owner-occupied homes and effortlessly gain access to the $20 trillion home equity market that spans multiple top U.S. cities. The company allows you to invest in a major city you love for as little as $500.
Americans are apparently thinking twice about purchasing property right now with the median home sale price climbing 4% since last year to a record $442,525 in June and the average 30-year mortgage rate at 6.92%.
At the same time, Fair Market Rents (FMRs) for one- and two-bedroom housing units in the nation’s 50 largest metros grew by $450 and $505 between 2019 to 2024, according to a LendingTree study.
With the rental market booming, there are still ways to make money from real estate, without having to purchase a home outright — such as through crowdfunding platforms like Arrived.
Backed by world class investors like Jeff Bezos, Arrived’s easy-to-use platform offers SEC-qualified investments in rental homes and vacation rentals.
Arrived’s simplified process allows accredited and non-accredited investors to take advantage of this inflation-hedging asset without them taking on the extra work of buying and managing a property themselves,
Getting started is easy: browse Arrived’s curated selection of homes, chosen for their appreciation and income generation potential.
Then, once you find a property you like, simply choose the number of shares you want to buy and start investing with as little as $100.
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Sellers are slashing prices
With fewer takers, properties are languishing longer on the market. The number of active listings climbed nearly 13% since last year, according to Redfin.
“We're seeing a slow shift from a seller's market to a buyer's market,” said National Association of Realtors chief economist Lawrence Yun in a recent press release.
“Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”
As a result, desperate sellers trying to offload their homes are reducing prices to reel buyers back in.
Nearly one in five homes for sale in June had a price cut — also the highest level of any June on record, reports Redfin. That’s a jump from 14.4% the year prior and just behind the 21.7% record set in October 2022.
In contrast to housing, necessity based commercial properties, like grocery-anchored retail, offer an historically stable investment for those seeking larger real estate opportunities. These assets cater to consumer needs, providing consistent returns even when the housing market fluctuates.
If you’re searching for an alternative to residential real estate, commercial properties might be the right fit, especially if you’re an accredited investor seeking to invest a larger sum with potential for quarterly returns.
First National Realty Partners (FNRP) allows accredited investors to access institutional-quality commercial real estate investments — without the leg work of finding deals yourself.
FNRP — one of the fastest-growing private equity firms — specializes in grocery-anchored commercial real estate. The firm has developed relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods, and provides insights into the best properties both on and off-market.
FNRP’s secure online platform makes investing in commercial real estate convenient and simple. You can engage with experts, explore available deals and easily make an allocation, all in one personalized portal.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
