The housing market in the US is showing signs of fatigue. On the heels of a multiyear stretch of limited inventory and soaring interest rates, today’s trend is one of retreat. Buyers are canceling deals, with many showing a willingness to forfeit earnest money deposits. However, buyers aren’t the only ones getting out of the market. Reports show that sellers are withdrawing their listings from the market.

According to RealEstateNews, in August, around 56,000 home purchase agreements were canceled, a figure that represents roughly 15.1% of contracts that month. That figure is the highest cancellation rate during August of any year on record. To further compound market problems, 42.3% of new listings were pulled from the market in September, per Compass data.

What’s behind this wave of frustration? Tight mortgage credit, high interest rates, pricing misalignment, and other usual suspects are certainly not helping. But as transaction fatigue sets in, new dynamics are asserting themselves. Buyers are losing patience, sellers are rethinking their timing, and the balance of leverage is tilting in unexpected ways.

The Surge in Cancellations

One of the most visible signs of market stress is the uptick in purchase cancellations. Redfin’s data shows that in August, 15.1% of contracts were canceled, a record high for that month under their records. Many buyers back out after uncovering costly repair issues during inspections, or when financing falls through due to rate volatility or stricter underwriting. Others simply conclude that the cost is too steep, especially when operating margins are already tight.

Sellers aren’t oblivious or immune to the weakening momentum. Many are withdrawing their listings in hopes of returning later when the market is more favorable. Compass’s Mike Simonsen estimates that around 200,000 sellers who listed this year may step back and wait for better conditions. The act of withdrawal itself further diminishes transaction volume. Since many sellers are also buyers, their decision to take their homes off the market also means that there are fewer buyers.

Sentiment Is Tipping: Buyers, Sellers Both Hesitant

According to Fannie Mae’s National Housing Survey, consumer outlook on homebuying remains subdued. In April 2025, the Home Purchase Sentiment Index (HPSI) lingered in the high 60s, which was a modest improvement compared to previous months, but it was still well below historical norms. More recently, by August, the HPSI read 71.4, signaling cautious optimism but not enough to overcome affordability barriers.

Industry experts agree that there is lingering tension beneath those numbers. While some indicators show slight upticks in optimism, such as Fannie Mae’s May results, which indicated a 4.3% gain month-over-month, consumers increasingly doubt that affordability will meaningfully improve. Many expect home prices, rent, and mortgage rates to remain high for the foreseeable future.

Sellers are reacting as well. Builder confidence has been stuck in negative territory for over a year. The National Association of Home Builders (NAHB) reports sentiment hovering between 32 and 34. Builders reportedly expect weaker demand and are widely cautious about taking on new projects, further damaging inventory projections.

Structural Headwinds: Rates, Supply, and Economic Pressure

Hard economic constraints and widespread uncertainty are only exacerbating the fear. Mortgage rates remain elevated, making monthly payments unaffordable for many buyers. Even a small rate shift can drastically change the calculus on what home someone can buy. As long as rates remain elevated, many buyers will remain sidelined.

Supply-side challenges only further compound the issue. Developers are pulling back on new construction, with forecasts suggesting single-family starts could fall roughly 5% in 2025. High construction costs, labor shortages, and regulatory hurdles make builders reticent to overextend.

On the demand side, economic uncertainty weighs heavily. Consumers are more cautious about job security, personal income growth, and debt levels. Consumer sentiment indices, including the University of Michigan’s and the Conference Board’s measures, have shown weakening trends. In this climate, long-term commitments like home purchases feel risky.

Regional Differences: Some Markets Are More Strained

When it comes to real estate, nothing matters more than location. With questions swirling around the market, it’s important to recognize that some regions are facing more strain than others. Markets that had been experiencing rapid growth, parts of the Sun Belt, inland California, and fast-growing metro areas, are now facing more pronounced pullbacks. In these places, buyers overpaid, took on tight margins, or locked in adjustable-rate loans that are now less tenable. Elsewhere, quieter markets with slower growth are showing less volatility but also less upside for sellers.

Similarly, markets dominated by condos or higher-density housing may see different dynamics. In fact, some experts believe that condos offer some level of opportunity since supply often outweighs demand in those settings. In contrast, single-family homes in desirable suburbs continue to face sharp supply constraints.

What’s Next: Turning the Tide or Treading Water?

What happens next largely depends on a number of factors. If interest rates decline, it’s fair to assume that some buyers will reenter the market, and those who have been waiting may be willing to purchase for the first time. Additionally, it remains to be seen what type of tax credits, buyer assistance programs, and other policies could be introduced to stimulate a struggling industry.

Buyers are exhausted, buyers are frustrated, and the housing market has largely become a game of endurance. The balance of power remains in a state of flux, and until something shifts, the market may remain in a state of stalled momentum.