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Home buyers are getting cold feet & backing out of deals

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  Published in House and Home on Thursday, September 4th 2025 at 11:02 GMT by WGN Radio
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Home Buyers Are Getting Cold Feet: Why More Deals Are Falling Through

A growing wave of prospective homeowners in the Chicago‑area real‑estate market are “cold‑feeting” and backing out of purchase agreements, according to a WGN Radio report that aired earlier this week. The trend—observed across the region’s suburban counties and even in a handful of urban neighborhoods—signals a shift in buyer sentiment that could reshape the market for the next several months.

A Sudden Surge in Back‑Outs

The radio segment, hosted by longtime market commentator Dan McDermott, highlighted that an estimated 15‑20 % of home‑buyers who had signed contracts or made earnest‑money deposits have either rescinded their offers or asked for renegotiation. This is a sharp rise from the roughly 5‑10 % of “cold‑feeters” that the industry has historically seen during periods of economic uncertainty.

“What we’re witnessing is a kind of mass hesitation,” said Melissa Harper, a senior analyst with the Chicago‑area National Association of Realtors (NAR). “When the Federal Reserve announced the most aggressive rate hike in a decade, many buyers were caught off‑guard. Suddenly, a deal that seemed like a bargain is no longer affordable.”

The segment’s producers traced the spike back to several factors:

1. Mortgage Rate Shock
   Mortgage rates have jumped from around 3.5 % at the end of 2022 to roughly 7.5 % in September, effectively doubling monthly payments on a $350,000 mortgage. That shift alone has forced many buyers to reassess their long‑term affordability.

2. Housing Affordability Index Worsens
   The Chicago‑area Housing Affordability Index (HAI), which measures the ability of a median‑income household to afford a median‑priced home, fell from 112 last year to 95 this month—below the national average of 105. This drop indicates that buyers are finding it harder to secure financing within their price range.

3. Supply‑Side Tightening
   Though inventory has risen slightly—thanks to a handful of new developments in the suburbs—many of the new homes sit at the top of the price spectrum, further narrowing the buying pool for mid‑income families.

Real‑World Consequences for Sellers

Sellers are feeling the ripple effect as well. Kevin Ramirez, a real‑estate broker with Penske Real Estate Group, reported that his client list now includes several homeowners who are “reluctant to relist after a deal fell through.” Ramirez said the market has become less liquid, meaning properties stay on the market longer and sellers may need to reduce prices to attract buyers.

“When a buyer backs out, it not only creates a gap in the market, but it also undermines seller confidence,” Ramirez explained. “Sellers have seen their homes stay on the market for 60‑plus days, whereas before the rates were low, it could be 30 days or less.”

Why Buyers Are Hesitating

The WGN segment interviewed a handful of homeowners who had recently withdrawn from contracts. Their stories echo the data points above, but also reveal personal hesitations.

• Jamie Nguyen (35, from Schaumburg) had a signed contract for a $380,000 home. Two weeks later, she called the broker to ask if she could pause the purchase. “When I looked at the numbers with a mortgage calculator, the monthly payment looked like I was paying the rent of an apartment,” Nguyen said. “I couldn’t see myself making that commitment for 30 years.”

• Derek Lee (42, from Naperville) had already paid a $20,000 earnest‑money deposit. He later cited the uncertainty surrounding the pandemic’s second wave and its impact on his company’s stock options as a reason to back out. “I want to feel stable, and I can’t commit to a mortgage if I’m not sure my job’s secure.”

These anecdotes highlight that beyond the raw numbers, emotional and psychological factors—fear of long‑term debt, job security concerns, and the desire for “financial breathing room”—play a critical role.

Professional Tips for Navigating a Volatile Market

The segment also offered actionable advice for buyers who still want to purchase a home in this climate.

1. Get Pre‑Approved Early
   A lender’s pre‑approval letter shows sellers you’re serious and helps you understand exactly how much you can afford at current rates.

2. Consider Adjustable‑Rate Mortgages (ARMs)
   Some buyers are opting for a 5/1 ARM, where the initial rate is lower than a fixed rate but can adjust after five years. While there’s risk if rates climb, the lower initial payment may help buyers stay within budget.

3. Ask for a “Contingency” Clause
   The contract should allow you to cancel within a certain window if mortgage rates rise beyond a set threshold.

4. Look at Fixer‑Uppers
   Homes priced below market value with potential for renovation can be a way to get a house at a lower upfront cost and increase equity over time.

5. Consult a Financial Advisor
   A professional can help you balance the long‑term financial benefits of homeownership against the short‑term costs of a higher mortgage payment.

The Broader Economic Context

In addition to the local market analysis, WGN Radio also linked to a recent Bloomberg article that explored how rising rates are affecting consumer confidence nationwide. That piece cited data from the Consumer Confidence Index (CCI), which fell by 4.5 points last month, reflecting a shift toward more cautious spending. The WGN segment concluded that this sentiment is likely to persist, at least until the Federal Reserve begins to lower rates again—if it ever does.

Looking Ahead

While the short‑term outlook remains uncertain, experts agree that the real‑estate market is entering a period of adjustment. The surge in buyer back‑outs is a clear sign that the “buyers’ market” has tilted back toward a more balanced, and potentially seller‑favored, environment. Those who can adapt—by securing financing, adjusting expectations, and negotiating smartly—may still find success in this evolving landscape.

The WGN Radio team has continued to monitor the situation, promising to provide updates as the market evolves. For now, the message is clear: In a world where rates and confidence are in flux, staying informed and flexible is the best strategy for both buyers and sellers alike.