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Last month, the National Association of Realtors reported a huge jump in cancellations of pending home sale contracts. 16 percent of contracts didn’t make it to closing, up from a norm of about 4 percent.

The chief economist at the NAR said he was baffled by it, but ask any agent working the nation’s neighborhoods, and they’ll tell you it is all about confidence and financing—specifically, a lack of both.

“It seems like everybody’s got home purchase ‘cancel-itis,’” says David Fogg, a real estate agent in Burbank, Calif.

“Currently, we are seeing about 75 percent, when we close escrow, had been in escrow 2 or 3 times prior.”

Fogg says the higher cancellations recently are most definitely tied to the turmoil in Washington, D.C. over the debt ceiling . Already nervous buyers are suddenly changing course, unsure how the debt crisis will affect the overall economy, and more importantly, their own employment.

More buyers did sign sales contracts in June than in May, though, according to a new report from the National Association of Realtors. Pending home sales rose 2.4 percent month-to-month and are nearly 20 percent* higher than June of 2010, the low point following the end of the home buyer tax credit.

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Forecasters expected sales of existing homes to rise in June because the pending home sales index, which measures signed contracts, rose in May. If you consider it takes 1-2 months to close, then there’s your indicator.

But that was not the case.

Sales fell, not by much, down 0.8% month-to-month, surprising even the Realtors, who thought May would be the weakest point. Sales were down 8.8 percent from June of last year, when most closings took place from the end of the home buyer tax credit.

What Realtors and prognosticators did not even consider was a strange phenomenon: June saw a spike in the contract cancellation rate to 16 percent. Existing home cancellation rates usually run under ten percent, and, in fact, in May were at just 4 percent. Cancellation rates for new home construction usually run higher than that, as buyers of newly built homes tend to be more volatile and put less (often nothing) down when signing a contract.

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