People who make offers on homes have started to find that appraisals well above these offers have triggered a large number of busted deals. California, home to some of the nation’s most expensive home markets, leads in cities with these broken deals. Another reason for these problems is appraisals that show major problems with red flags.
Nationally, sales have been failing at an increasing rate, rising to 4.3% in Q4 2016 from 1.4% of all listed properties during Q4 2014. On an annual basis, the failure rate has nearly doubled to 3.9% in 2016, up from 2.1% in 2015.
Of all listings in the largest 100 metros, 7.1% of starter home listings failed in the most recent quarter, compared with 6.7% of trade-up homes and 3.8% of premium homes. For all of 2016, the failure rate was 6.3% for both starter and trade-up homes and 3.6% for premium homes.
Of the top 10 metros that have had the highest proportion of failed sales during the past 2 years, eight of them are in the West and three of those are in California. The two that are not in the West are Atlanta and Chicago with a quarterly average of 7.2% and 6.5%, respectively, of all unique listings reverting back to a for sale status. In comparison, looking only at the most recent quarter, seven of the top 10 metros are in the West, but four of those are in California. Charleston, S.C., has moved up to second among the top 100 metros from 88th with 11.9% of sales failing, up from 1% in Q4 2014 to second.
The failure rate is 11.6% in Ventura, California; 10.8% in Tucson, Arizona; 10.5% in Atlanta, Georgia; 10.4% in Fort Worth, Texas; 10.3% in Los Angeles, California; 10.3% in Charleston, South Carolina; 9.7% in San Jose, California; 9.6% in Orange County, California; 9.3% in Portland, Oregon; and 9.3% in Akron, Ohio, which has some of the lowest home prices in the country.