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Canceled home sales tripled in San Jose, doubled in Oakland last year

Buyers are backing out of deals more often all over, but the South Bay took it the hardest in 2016

An aerial view of San Jose residential homes. Photo by pbk-pg/Shutterstock

Sometimes, a deal is not quite a deal. A home sale may go kaput at the last minute and rudely jilt a seller right back onto the market. In fact, it happens in about four percent of all home sales nationwide, according to the real estate site Trulia.

In San Francisco the number of such incident is pretty small relative to the rest of the country. But in a report titled “Sale Fail,” San Francisco-based Trulia compared the number of times buyers bolted at the last minute in 2016 to the previous year.

Turns out failure figures are up all over the Bay Area—sometimes up by huge margins.

Take, for example, San Jose. In 2015, only a very modest 3.2 percent of tentative sales ended in a snafu, placing it 70th out of the nation’s 100 largest cities.

In 2016, that figure more than tripled to 9.7 percent, according to Trulia. Suddenly, San Jose ranks seventh in the nation in this peculiar phenomena.

Photo by pbk-pg/Shutterstock

San Francisco (not mentioned on the Trulia blog, but in a separate spreadsheet of MLS data) saw an uptick in this behavior too, but only from 3.8 percent to 5 percent. In Oakland, on the other hand, the rate more than doubled, from 3.9 to 8.5 percent.

The report notes that cheaper starter homes and first-time buyers are more likely to fall victim to the phenomena.

What does it mean? Trulia analyst Felipe Chacón doesn’t draw any particular conclusions from the data. Sometimes, of course, buyers or sellers can just plain get cold feet, or sometimes the seller can run into trouble with something like title insurance.

But the most common reason is inability to secure financing, either because of mortgage rejection, failure to sell a present home, or both.

Photo by Ruslan Kokarev/Shutterstock

It’s probably not a coincidence, of course, that this occasional problem became less occasional in markets where prices exploded in 2016.

On Zillow, for example, the median price of a home in San Jose spiked 11 percent during the course of 2016, before cooling down for an eight percent rise year over year in December.

On Trulia itself, San Jose’s median home price surged over nine percent from the beginning of the year through the end of August. It later dipped down to about a five percent increase for the year overall.

And the National Association of Realtors reported at the end of the summer that San Jose homes were averaging over $1 million, “The first time that the group has registered such a high figure in a metro area,” the San Francisco Business Times noted.

Photo by Matthew Corley/Shutterstock

San Francisco home prices, on the other hand, were mostly flat throughout the year on the same platforms, increasingly noticeably but not catastrophically year over year.

According to the Census, San Jose enjoys a higher median income than San Francisco by over $3,000. But San Francisco income is rising faster, jumping 3.8 percent between 2014 and 2015 (the most recent years available) here, versus just 1.2 percent in the South Bay.