This is the percentage of contracts (new orders) that were canceled during the given period.
Because of the high costs and intensive labor associated with home building, many home building companies only begin construction on new homes after the homebuyer has signed a contract. However, homebuyers can still cancel the contract, leaving the company with excess inventory.
In particular, in times such as the 2008 Financial Crisis when housing prices are volatile and consumer confidence is down, contract cancellations will increase, compounding home builders woes in a down housing market.
