The housing market is seeing more buyers get cold feet as mortgage rates soar

• Nearly 16% of home sale deals in August were canceled, the highest rate since last October, Redfin reported.
• Soaring mortgage rates, which climbed as high as 7.23% last month, are giving homebuyers cold feet.

Surging mortgage rates are not only keeping potential homebuyers out of the market, they're pushing away those who were ready to sign.

In August, 15.7% of home-purchase deals set to go under contract that month were canceled, equal to nearly 60,000 of agreements, Redfin reported. That's the highest rate since cancellations peaked in October 2022 and up from 14.3% a year earlier.

"I've seen more homebuyers cancel deals in the last six months than I've seen at any point during my 24 years of working in real estate. They're getting cold feet," Jaime Moore, a Redfin real estate agent quoted by the release, said.

"Buyers get sticker shock when they see their high rate on paper alongside extra expenses for maintenance, repairs and closing costs. Many of them would rather back out, even if it means losing their earnest money. A lot of sellers are also willing to let buyers slip away because they don't want to concede to repair requests."

But the key reason homebuyers are backing out is today's mortgage rate environment,

The 30-year fixed mortgage rate averaged 7.07% in August, but jumped as high as 7.23% during the month, the highest in 22 years, according to Redfin.

That surge contributed to the average monthly mortgage payment hitting an all-time high of $2,632, according to a separate Redfin report.

Rising home prices added to headwinds faced by buyers. Median home sale prices saw the largest annual increase since October, rising more than 3% last month.

Though rising rates would traditionally put downward pressure on home prices, buyers are competing amid a significant supply shortage. And while construction has picked up, it will take time for the supply-demand imbalance to settle.