Homebuyers who can afford to bypass the highest mortgage rates in two decades are increasingly forgoing financing and paying all cash, according to the Associated Press.
Homes purchased entirely with cash accounted for 34.1% of all sales in September. That’s up from 29.5% a year earlier and the highest share in nearly a decade, according to a Redfin analysis of home sales in 40 of the nation’s most populous metropolitan areas.
Still, sharply higher home loan borrowing costs, a dearth of homes for sale, and rising home prices have dampened home sales overall, which has helped give a boost to all-cash transactions’ portion of all home sales.
Even as their share of all sales increased, the number of all-cash transactions in September fell 11% from a year earlier, Redfin found. In contrast, home sales overall fell 23% in the same period.
Even homebuyers who use financing are electing to make bigger down payments in order to reduce the size of their mortgage. The typical U.S. homebuyer put down 16.1% of the purchase price in September, the highest percentage in nearly a year and a half, Redfin said.
The inventory of previously occupied homes for sale nationally is near historic lows, which has kept prices ticking higher despite the market downturn. That means buyers who can pay all cash have a competitive edge over those who are relying on financing.
Moreover, the average rate on a 30-year home loan has been above 7% since August, hovering at times just below 8%, according to mortgage buyer Freddie Mac.
Cash is also king when it comes to the luxury home market, which Redfin defines as properties with a market value within the top 5% of a given metropolitan area. All-cash transactions accounted for 43% of all homes in that category that were purchased in the third quarter, up from 35% a year earlier, Redfin said.
