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By Kristin Myers, Editor-in-Chief

ICYMI: Home Sales Canceled at Highest Rate Since Pandemic Started

In case you missed it, buyers are getting cold feet and are canceling their purchases of homes, according to new data from the national realty firm Redfin. Just under 15% of home purchase agreements fell through in June, up from 12.7% in May, and a big leap from 11.2% a year ago. That's the highest rate since the start of the pandemic when home sales cancellations soared over 16%.

But with homes still in such high demand, why are homebuyers changing their minds?

Even though mortgage rates have declined recently, the average rate on a 30-year fixed-rate loan has surged well above 5%. Those high rates are forcing some homebuyers to back out of the homebuying process because they can no longer afford it.

But as mortgage rates rise, it's also putting pressure on sellers to lower their prices if they want to sell their homes quickly. With some homeowners offering lower prices on their homes, some buyers are canceling their purchases to find or negotiate better deals.

With inflation jumping 9.1% since last year, the Federal Reserve is likely to get even more aggressive about raising interest rates, which will cause mortgages to get even more expensive. If you're looking to sell your home, you might have to lower your asking price to make it more likely that a buyer will be both interested and able to afford buying your home.

-Kristin

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Term of the Day

Earnest Money Deposit

Earnest money is an initial, good faith deposit that you make when you sign a purchase agreement to buy a home, and it's typically 1% to 5% of the sale price but buyers may put as much as 20% down. When submitting your earnest money deposit, it's important to protect yourself by working with a reputable third party and getting a receipt. Besides being scammed, you can also lose your earnest money deposit if you don't follow the terms of your purchase contract.

These terms can include items such as when inspections need to be completed, and when you can back out of the contract without losing your deposit. For example, if the home inspection reveals something about the property that you don't like, you can usually back out of the contract within a certain deadline. However, if you try to cancel the contract past the deadline, you might lose your earnest money deposit. But laws do vary by state, so be sure to read your contract thoroughly.

If the home purchase is successful, the earnest money will be claimed by the seller. If you change your mind about buying the house and the purchase contract falls through, the deposit may be refunded back to you, depending on the circumstances.

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Off the Charts

The average credit card interest rate for purchases surged from 20.65% to 21.06% in June, according to data collected by The Balance. It was the highest monthly jump in APRs since The Balance started collecting this data in October 2019.

In June, the Federal Reserve intensified its fight against inflation and raised its benchmark interest rate by three-quarters of a percentage point, the largest single rate hike since 1994. The Federal Reserve's interest rake hikes influence the prime interest rate, which is what U.S. banks charge their best customers, generally setting it three percentage points higher than the fed funds rate. This leads to higher credit card APRs, making debt more expensive if you're carrying a balance from month to month. If you're in the process of paying off credit card debt, remember that credit card interest compounds, meaning previous interest charges are included in each monthly interest calculation.

As a result, card balances can grow quickly, and every APR percentage point matters. Even small changes to your card's interest rate—similar to what we've seen happen to the average credit card APR over the past year—can add up to higher debt costs. So if you fall behind on your monthly payments, those costs can rise even more under a much higher penalty APR.