Percentage of Houses Bought for Cash Hits Post-2014 High
In October almost a third of purchases were all cash, up from 29.9% the year before.
There’s a big uptick in the number of houses being purchases for all cash, according to data from Redfin. About 31.9% of house purchases were cash in October, the firm said, compared to 29.9% in October 2021. That’s the highest percentage the firm has tracked since 2014.
The push on cash purchases began to take off in early 2021, after hitting a “record low” of 20.1% in April 2020.
“Today’s affluent homebuyers are motivated to pay in cash because the surge in mortgage rates makes them want to avoid loans — and the high monthly interest payments that come with them — altogether. Mortgage rates have declined in recent weeks but are still hovering above 6%,” said Redfin Economics Research Lead Chen Zhao in the press release. “During the pandemic housing boom, buyers were incentivized to pay in cash because of low rates, which drove up competition and made all-cash offers an effective bargaining chip for those who could afford them.”
But the percentages shouldn’t be viewed out of a larger context. According to the latest existing home sales numbers from the National Association of Realtors, 4,090,000 units seasonally adjusted sold in November 2022. In November 2021, the figure was 6,330,000. That’s a drop of more than 35%.
And according to data from the Federal Reserve Bank of St. Louis, there were approximately 671,000 seasonally adjusted new houses sold and for sale in October 2021 compared to October 2022’s 588,000 — a 12.4% fall.
Although the numbers don’t line up exactly, it’s a picture of a large shift in sales. That could also mean a change in percentage of cash sales not necessarily because of more cash sales but fewer non-cash ones.
In this last October, Redfin said that all-cash purchases were most common in Florida (Jacksonville at 49.7% and then 48.6% in West Palm Beach), followed by Cleveland and Cincinnati, Ohio.
The firm said that FHA-based mortgaged homes sales, at 14.6%, had the highest share in two years. The year before, it was 13.1%. “FHA loans, which typically allow for lower down payments, have ticked up in popularity in response to the slowdown in housing-market competition,” Redfin wrote. “They were less common at the height of the pandemic buying boom, when sellers were receiving multiple offers and would often choose the one with strongest financing.”
Similarly, the share of VA loans was up to 6.9% in October, up only slightly from 6.4% in 2021.