'A lot of cold feet': Homebuyers are backing out of deals at the highest rate on record. Here's what's driving this trend

Why buyers are backing out

With high prices and home loan rates around 7%, it’s no surprise buyers are feeling antsy about going through with an expensive real estate investment.

But it’s not just about these basic costs. Home insurance rates have been climbing, especially in disaster-prone states dealing with the effects of climate change.

Some buyers are also reluctant to purchase homes that might require renovations or repairs since these can drive up the overall cost of the property.

The latest data from Thumbtack’s Home Care Price Index reveals the average annual cost to maintain a single-family home climbed to $6,548 in the third quarter of 2023 — the highest amount recorded by the home services directory.

“Buyers want turnkey houses because everything is so expensive now, whereas in 2021 and 2022 they felt lucky to get any house,” Redfin Premier real estate agent Heather Mahmood-Corley said.

“And while I’m seeing more sellers in the market, they’re squirrely too. They’re backing out when they don’t get the price they want.”

Some determined sellers are trying to lure buyers by offering concessions, such as money for repairs and mortgage buydowns, or they’re slashing prices when they’re not seeing as much demand as expected.

Stop overpaying for home insurance

Home insurance is an essential expense – one that can often be pricey. You can lower your monthly recurring expenses by finding a more economical alternative for home insurance.

SmartFinancial can help you do just that. SmartFinancial’s online marketplace of vetted home insurance providers allows you to quickly shop around for rates from the country’s top insurance companies, and ensure you’re paying the lowest price possible for your home insurance.

Explore better rates

You can still invest in real estate without buying a home

While plenty of hopeful buyers are pausing on buying physical property, there are alternative options for folks to invest in real estate that don’t come with the stress of potential costs like repairs and insurance upping the price tag later on.

For example, real estate investment trusts (REITs) are entities that allow you to earn returns from multiple properties at a time without owning a single one yourself. They’re similar to a mutual fund, except REITs own and operate properties that produce income, including apartment buildings and shopping malls.

If you’re an accredited investor, consider tapping into commercial real estate. Some firms allow investors to own shares of institutional-quality properties leased by major retailers, including CVS and Kroger.

You can also look into investing in rental and vacation properties via online platforms and skip the responsibilities of being a landlord.