As jobs recover, the fraction of purchase contract terminations has started to decline again, according to REALTORS® who responded to NAR’s June 2020 Realtors® Confidence Index (RCI) Survey, a monthly survey of Realtors® that ask about their transactions during the month. The survey asks “In the past three months, think of your most recent sales contract that was either settled, closed, or terminated. How did this deal conclude?”In the June 2020 survey, 7% of sales contracts were terminated based on the respondent’s most recent contract that either closed, terminated or was settled during April, May, and June.1 The share of contracts that were terminated jumped up to 12% in the April 2020 survey but it started to decline to 9% in the May survey, and it further fell to 7% in June. However, this is still an elevated share compared to the less than 5% contract termination rate prior to the coronavirus pandemic outbreak.
A big factor causing the increase in terminations was job loss. Among the reasons cited for the terminations, job loss accounted for 18%, peaking to 30% in May. However, the share of reasons related to job loss has gone down to 17% in April as lost jobs started to be recovered and with fewer unemployment layoffs. The fraction of contracts being terminated should continue to fall as jobs continue to recover, as is happening with 8.8 million more workers during May-June compared to April.
The largest share of reasons cited among contracts terminated was “issues related to obtaining financing”, at 22%. However, this is only slightly higher than the share in January 2020 (19%). The largest reason is “Other” reasons and this includes reasons related to the coronavirus pandemic such as:
- buyers and sellers backing out
- buyer/seller contracting coronavirus
- travel restrictions/issues
- Builder delays
Appraisal, lender, titling, recording, and setting up escrow, and other delays related to settlement and closing.
1 The most recent sales contracts reported by respondents can be viewed as a random sample of all sales contracts.