Cancellation Rates Are Soaring in Metro Denver as Interest Rates Price Out Homebuyers

Long lead times and fast-rising mortgage rates are causing an uptick in cancellations on homes under construction in the Denver metro area, leaving both builders and homebuyers in a predicament not seen since the housing bust of 2008. Mortgage lenders are often unwilling to lock in rates for the full length of time that it can take to build a home—especially as supply chain disruptions lengthen lead times—meaning that buyers who thought they would get a 3% interest rate on their 30-year mortgages a year ago are now facing rates above 6%, The Denver Post reports.

Before April 2022, the share of canceled contracts in metro Denver was under 15%, but by the end of July, the total share of cancellations had soared to 45%, and as rates continue to climb higher, buyers are pulling out of purchases in droves.

“We have seen a dramatic shift in the number of people walking through the door,” said Danielle Davis, vice president of sales & marketing at McStain Neighborhoods. “It has been one of those things where people fear buying at the top of the market. They don’t want to be perceived by those around them as having made a bad choice at the wrong time. We are seeing a lot of hesitancy.”

Davis describes what the new home market has suffered as a “sucker punch,” one that has builders and consumers alike stunned and trying to catch their breath and figure out what to do next.

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