Home Sale Cancellations Hit 13.7% in January - Highest on Record

Min 1:

Nearly 40,000 home-sale agreements nationwide were canceled in January 2026, equal to 13.7% of homes that went under contract that month according to Redfin analysis of MLS pending-sales data.

That's up from 13.1% a year earlier and marks the highest January share in records dating back to 2017.

Sales are falling through at higher rates largely because it's a buyer's market with hundreds of thousands more U.S. home sellers than buyers.

That gives buyers negotiating power—they may back out during the inspection period if they see a home they like better or an inspection issue arises.

"More buyers are backing out," said Alin Glogovicean, a Redfin Premier agent in Los Angeles, where 16.7% of home purchase agreements were cancelled in January, up from 15% a year earlier.

"They're second-guessing the wisdom of making a huge purchase when there's a fear in the back of their mind about the state of the economy and the uncertainty of their finances."

This continues a troubling trend—December 2025 saw 16.3% of contracts cancel, the highest December rate on record.

January's slight improvement to 13.7% reflects normal seasonal patterns, but the year-over-year increase signals growing buyer caution and market unpredictability.

Min 2:

The numbers reveal massive regional variation in cancellation rates.

San Antonio led the nation in January with 21.2% of home-purchase agreements canceled—up from 15.6% the prior January. That means more than one in five deals fell through.

Atlanta followed at 18.5%, then Cleveland at 17.9%, Riverside, CA at 17.5%, and Orlando at 17.3%.

These markets share common traits—oversupply from pandemic-era construction booms meeting slowing buyer demand as migration patterns reverse.

On the opposite end, just 3.5% of home-purchase agreements in San Francisco were canceled in January—the lowest share of metros Redfin analyzed.

Nassau County, NY came in at 4.8%, San Jose at 5.3%, Milwaukee at 7.6%, and Oakland at 8.4%.

What separates low-cancellation from high-cancellation markets?

Inventory constraints.

In high-priced, inventory-starved coastal metros, buyers worry they might not find another comparable property if they walk away.

In San Jose, where median homes cost $1,349,000, the buyer pool consists of exceptionally well-paid tech professionals making financing failures less common.

Min 3:

Compare today's cancellation environment to historical patterns and the shift becomes obvious.

In a typical housing market, about 3% to 5% of pending home sales fall through before closing due to financing issues, failed inspections, or unexpected life changes.

January 2026's 13.7% cancellation rate runs nearly triple the historical norm.

Cancellations spiked to 10.5% in March 2020 at the pandemic start, then fell to an unusually low 5.4% in May 2021 as buying frenzy and intense competition peaked. Deal failures climbed again in late 2022 as mortgage rates rose steeply from pandemic lows.

"As rates settled into a higher but more stable range, cancellations eased and have remained relatively steady through 2024 and early 2026," explained Jake Krimmel, Realtor.com senior economist.

But February 2026 data shows cancellations dipping to 7.2%—down from 7.4% a year ago and lower than January's 7.6%.

That February improvement suggests some stabilization. Pending home sales climbed 4.2% annually in February, marking the largest year-over-year increase in 15 months.

Mortgage rates remaining at multiyear lows since mid-January and slipping below 6% at February's end helped buyers stick with deals.

Min 4:

Individual buyers face different dynamics than investors when contracts fall through.

Buyers frequently back out using the inspection contingency—they may cancel because a structural issue came up, even if their primary reason is that mortgage payments proved too expensive.

Investors typically lock in financing before making offers and waive inspection contingencies to compete.

When investors bail on contracts, it signals serious market concerns—not financing wobbles or cold feet about homeownership. Investor cancellations concentrate in markets where fundamentals deteriorated rapidly.

Small investors should view high cancellation rates as market signals, not opportunities. When one in five deals falls through in San Antonio, that indicates oversupply and weakening demand—not ideal conditions for acquiring rental properties.

Buyers have options and walk away if they find better deals.

Conversely, low cancellation markets like San Francisco (3.5%) and San Jose (5.3%) signal tight supply where buyers commit firmly once they secure contracts.

These markets favor sellers, making investor acquisitions more difficult but also signaling sustained demand supporting rental income.

Min 5:

Anyone looking to invest should interpret cancellation data as leading indicators of market direction.

High cancellation rates precede price declines by several months as sellers realize they must reduce prices to attract committed buyers who won't bail.

San Antonio's cancellation rate jumped from 15.6% in January 2025 to 21.2% in January 2026—a 5.6 percentage point increase.

Cleveland rose from 14.9% to 17.9%, and San Jose from 2.9% to 5.3%.

These markets face increasing buyer reluctance signaling price pressure ahead.

Markets where cancellations fell year-over-year show strengthening fundamentals.

Tampa dropped from 17% to 15.1%, Milwaukee from 9.3% to 7.6%, and Nassau County from 6.4% to 4.8%.

Falling cancellation rates indicate buyers increasingly committing to purchases—a precursor to price stabilization or growth.

"High housing costs and rising inventory have made homebuyers more selective," said Chen Zhao, Redfin's head of economics research.

"Home sellers outnumber buyers by a record margin, meaning the buyers who are in the market have options and may walk away if they believe they can find a better or more affordable home."

Takeaway:

Nearly 40,000 home-sale agreements were canceled in January 2026—13.7% of all contracts signed that month according to Redfin.

That's the highest January cancellation rate since tracking began in 2017, up from 13.1% in January 2025.

San Antonio led the nation with 21.2% of deals falling through, followed by Atlanta at 18.5% and Cleveland at 17.9%.

These Sun Belt markets face oversupply from pandemic construction booms meeting slowing demand as migration reverses.

Meanwhile, San Francisco saw just 3.5% cancellations as inventory constraints keep buyers committed.

High cancellation rates precede price declines by several months as sellers reduce prices to attract committed buyers.

Markets where cancellations rose sharply year-over-year—San Antonio up 5.6 percentage points, Cleveland up 3 points—signal weakening fundamentals and price pressure ahead.

Individual investors should avoid markets with cancellation rates above 15% as these indicate oversupply and buyer reluctance.

Instead, target markets where cancellations fell year-over-year like Tampa (down from 17% to 15.1%) or Milwaukee (down from 9.3% to 7.6%) as these show strengthening buyer commitment.

Monitor cancellation trends monthly to identify turning points before they appear in price data. When cancellation rates stabilize or decline after rising, that signals market bottoms approaching. February 2026 showed improvement to 7.2% nationally—suggesting January's 13.7% may represent a peak.

Position ahead of spring selling season by acquiring properties in markets showing cancellation rate improvements within the next 60-90 days before broader buyer demand returns.