Patrick Carlise, from Paragon Real Estate Group, prepared a rough analysis of the SF real estate deal fall-through rate, by comparing the # of properties going under contract to the # closing sale. He tracked the UC/Solds data with a 1 month gap (factoring in an average 30-day escrow period), comparing, for example, the number of homes that went under contract from February through July, with the number of homes that closed sale in March through August. Not a perfect analysis, but still useful.
As you can see in the chart below, Patrick claims that before the financial markets meltdown of 9/08, the deal fall-through rate was very low: Only about 2% or 1 in 50 deals falling through. Everybody got a loan, appraisals never a problem, little buyer uncertainty.
Jumping forward 12 months, after the meltdown, but at the beginning of the spring recovery, the fall-through rate more than tripled — extremely difficult financing environment, manifold appraisal difficulties, buyer remorse cancellations, and the beginning of short-sales in the city (which, though a relatively small percentage of overall sales still have a very high fall-through rate): 6.7% as a percentage of deals, about 1 in 15 deals falling through, says Patrick.
Then most recently, the fall-through rate drops by a third to about 4.4%, 1 in 23 deals, (still more than twice the percentage in 2008) because though financing is still difficult, it’s not quite as impossible as before (and we’re more prepared for it) and the buyer remorse cancellations have fallen. On the other hand, the number of short sales is increasing, though supposedly they’re getting easier to close than in the past.
SF Deal Fall Through Rates [Patrick Carlisle-Paragon Real Estate Group]