Home-purchase contract cancellations surged to their highest level in nearly a decade in December, signaling softer home sales ahead as affordability strains and economic uncertainty continue to weigh on buyers.
According to a new report from Redfin, more than 40,000 signed home-purchase agreements were terminated in December. That figure represents 16.3 percent of all homes that went under contract during the month, the highest share since Redfin began tracking cancellations in 2017. The rise reflects a housing market where buyers are increasingly cautious and willing to walk away when deals no longer pencil out.
The increase in cancellations coincided with a growing imbalance between supply and demand. Sellers outnumbered buyers by roughly 47 percent nationwide, giving purchasers more leverage and reducing the pressure to move quickly. With more options available, buyers are scrutinizing prices, inspection results and financing terms more closely than in recent years.
Affordability Pressures Drive Buyer Caution
High home prices and elevated mortgage rates remain central factors behind the trend. Monthly payments for many homes are still significantly higher than they were just a few years ago, even as wage growth has cooled. As a result, buyers are more sensitive to appraisal gaps, repair costs and changes in loan terms.
Economic uncertainty has also played a role. Concerns about job stability and household finances have led some buyers to pause or exit transactions before closing. In many cases, buyers are opting to wait for better pricing or clearer signals about the direction of the economy.
Cancellations were most pronounced across several Sun Belt markets, where inventory has grown rapidly and sellers are facing stiffer competition. In those regions, price reductions and concessions have become more common, reinforcing buyers’ willingness to renegotiate or walk away.
California Shows Relative Resilience
California markets have so far recorded comparatively lower cancellation rates. Metros such as San Francisco and San Jose continue to see tighter inventory conditions than much of the country, limiting the extent of buyer pullback.
Still, the state is not immune to the broader slowdown. Pending sales have shown signs of softening, suggesting that closed transactions in early 2026 could remain subdued. Even in supply-constrained markets, buyers are pushing back against aggressive pricing and are less inclined to absorb unexpected costs.
In the San Gabriel Valley, local agents report a similar dynamic. Buyers in cities such as El Monte, Baldwin Park and Rosemead remain active, but they are moving deliberately. Homes that are priced realistically and show well continue to attract interest, while overpriced listings are more likely to see contract delays or renegotiations.
Outlook For Early 2026
With cancellation rates still elevated and pending sales under pressure, price growth could moderate further during the first quarter of 2026. For sellers, the data underscores the importance of accurate pricing and flexibility. For buyers, increased leverage may translate into better terms and more negotiating power.
The Redfin report provides a snapshot of a housing market transitioning away from the urgency of recent years toward a more balanced, and cautious, environment. More details are available at https://www.redfin.com/news.
