For some reason, buyers have been pulling out of contracts more than they ever did in the past. Most of us track business through signed contracts, figuring that the number of signed contracts that do not close stays relatively close to the same percentage year in and year out, so we don't feel that we have to adjust for sales that do not close, since they don't change year over year comparisons. For the past couple of years, however, that hasn't been the case--nationally, contracts that don't result in closed sales have doubled or tripled. For a long time, we all thought that was the fault of banks and, through them, appraisers.
While banks are always popular to blame for most things, it appears that there may be something else at work. Even though we are now at a point in the real estate market where units are increasing and mortgage rates have started to rise, buyers still seem to feel that they have unlimited time and unlimited choice, so they dither. Each time something new comes on the horizon, they go off to see it, even when they have already signed a contract for something else. Instead of the principle of cognitive dissonance, which says that your mind will convince you that you've done the right thing when you make a choice and it is done, they now seem to deal with buyer's remorse by revisiting the choice again and again. Is this a generational issue, since first-time homebuyers, who dominate the current market, have older relatives coming in and advising them before their purchases are finalized? Or is this the result of a world where no one thinks that his or her decisions are final? We'll find out when the economy improves more, since there won't be as much distraction with other choices drying up. In the meantime, our advice to sellers is age old: Don't count your chickens before they hatch.