Home Sales Canceled at Highest Rate
According to new data from the national real estate firm Redfin, buyers are getting cold feet and canceling their home purchases. In June, just under 15% of home purchase agreements fell through, up from 12.7 percent in May and a significant increase from 11.2 percent a year ago. This is the highest rate since the beginning of the pandemic when home sales cancellations increased by more than 16 percent.
But, with homes still in such high demand, what is causing homebuyers to reconsider?
Despite recent declines in mortgage rates, the average rate on a 30-year fixed-rate loan has risen well above 5%. Because of the high speeds, some homebuyers are opting out of the process because they can no longer afford it.
However, as mortgage rates rise, sellers are under pressure to reduce their asking prices if they want to sell their homes quickly. Because some homeowners are offering lower prices on their properties, some buyers are canceling their purchases to find or negotiate better deals.
With inflation up 9.1 percent since last year, the Federal Reserve is likely to be more aggressive in raising interest rates, making mortgages even more expensive. If you’re looking to sell your home, you may need to lower your asking price to increase the likelihood that a buyer will be both interested and able to afford it.
Deposit of Earnest Money
Earnest money is an initial, good-faith deposit made when you sign a purchase agreement to buy a home. It is typically 1% to 5% of the sale price, but buyers may put up to 20% down. It is critical to protect yourself when submitting your earnest money deposit by working with a reputable third party and obtaining a receipt. You may lose your earnest money deposit if you do not follow the terms of your purchase contract, in addition to being scammed.
These terms may include when inspections must be completed and when you can cancel the contract without losing your deposit. For example, if the home inspection reveals a flaw in the property, you can usually back out of the contract within a certain time frame.
However, if you try to cancel the contract after the deadline has passed, you may forfeit your earnest money deposit. However, laws vary by state, so thoroughly read your contract.
The seller will claim the earnest money if the home purchase is successful. If you change your mind about buying the house and the purchase contract falls through, depending on the circumstances, the deposit may be refunded to you.
According to The Balance data, the average credit card interest rate for purchases increased from 20.65 percent to 21.06 percent in June. It was the largest monthly increase in APRs since The Balance began collecting this information in October 2019.
In June, the Federal Reserve increased its benchmark interest rate by three-quarters of a percentage point, the most significant single rate increase since 1994. The Federal Reserve’s interest rate hikes have an impact on the prime interest rate, which is what U.S. banks charge their best customers and is typically set three percentage points higher than the fed funds rate.
This causes credit card APRs to rise, making debt more expensive if you carry a balance from month to month. If you’re paying off credit card debt, keep in mind that credit card interest compounds, which means that previous interest charges are included in each monthly interest calculation.
As a result, card balances can quickly accumulate, and every percentage point of APR matters. Even minor changes in your card’s interest rate, as we’ve seen with the average credit card APR over the last year, can add up to higher debt costs. If you fall behind on your monthly payments, your costs could skyrocket due to a much higher penalty APR.
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