Over 400 deals to buy a home in Miami-Dade died in June. Over 500 fell apart before reaching the closing table in both May and April. The contracts were canceled. There was no deal.
Over 16% of pending home sales have gone bust before closing in Miami-Dade County this year according to data from real estate website Redfin. And while that’s fairly steady over the past several years, it remains higher than the national rate.
A record number of home buying contracts were canceled nationwide in June. Fifteen percent of deals ended before they could be finished. The cancelation rate is higher in several Florida areas, though, including Miami-Dade County.
"It's a very volatile market," said Miami Association of Realtors Chief Economist Gay Cororaton.
Still, she called the cancelation rate "surprising."
Home buyers in three other Florida regions had colder feet in June compared to Miami-Dade. About one in five backed out of home contracts in Orlando, Jacksonville and Tampa. That trio led the nation in canceled home purchase contracts in June.
Buyers usually put down earnest money when they make an offer to buy a home or condo. That money goes toward the purchase price if the deal is closed. The buyer risks losing that money if a contract is canceled.
There are several reasons why a contract to buy a home may go bust after both buyers and sellers agree to a purchase price. A home inspection may turn up costly repairs the seller doesn't want to pay for, there may be an issue with the home's appraised value, and the buyer may have trouble getting a mortgage.
"Buyers are just very interest rate sensitive," Cororaton told WLRN. "Affordability (also) is an issue. They're getting hit with both high mortgage rates and at the same time prices are still rising in most markets."
South Florida has traditionally seen more than its share of cash buyers, insulating them from changing borrowing costs. More than one out of every four single family homes sold in Miami-Dade County in June sold for cash. It was even higher for condos – 49%.
While the cost to borrow money to buy a home has come down, it remains much higher than before and during the COVID-19 pandemic. In June the average 30-year mortgage interest rate fell below 7%, and recently has fallen to a one-year low.
Meanwhile, prices for single family homes have held up. The median price for a home sold in South Florida in June ranged from $625,000 to $650,000, up 4% to 7% from a year earlier. Higher borrowing costs and higher prices make affordability a challenge for more potential buyers.
A challenge unique to Florida, and concentrated in South Florida, is hitting the condominium market. New state regulations put into place after the collapse of the Champlain Towers South in Surfside three years ago take effect at the end of this year. Among the new rules are requirements for buildings older than 30 years old to have an inspection and for condo associations to have financial reserves to fix any issues.
READ MORE: Old condos crowd the market for sellers in South Florida as post-Surfside reforms loom
"In the first place, buyers won't even probably go into a contract if they're very skittish about the condo market," Cororaton said.
The pace of condo sales has fallen in South Florida as the end of the year deadline approaches for the condo reforms. The number of condos for sale has ballooned more than 30% compared to a year ago. Despite the jump in the supply of condos on the market, median prices continued to increase year-over-year in June.
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