New real estate data and reporting recently revealed that nearly a third of U.S. homebuyers are sidestepping a mortgage and purchasing property via cash-only transactions, according to Redfin. This is a trend that is suddenly dominating big cities like Atlanta, Ga., and Jacksonville Fla., where 41% and 49% of deals are handled mortgage-free, respectively.
But what about the NYC metro area? In a densely populated locale, where home prices tend to exceed national norms, is this unconventional method of buying a reality? According to the data, it appears so.
“Only the wealthy are essentially buying homes,” Lawrence Yun, chief economist at the National Association of Realtors, recently stated, responding to data provided by the realty company Redfin, which indicates a sudden rise in all-cash sales.
Redfin’s report, which noted that the share of homes bought with cash is now at levels not seen since 2014, detailed the share of all-cash home purchases in major U.S. cities in 2022 vs. the share of mortgaged homes using FHA, VA, and conventional loans.
According to the stats, 31% of home sales in NYC were loan free.
“What we found was those who already were more well-off were able to take advantage of the strong housing market and add to their wealth, while those trying to better their situation were often pushed to the side,” Ali Wolf, chief economist at Zonda, a housing data and consulting firm, stated.
The trend isn’t happening equally across the country, but more accurately in pockets, the Redfin report indicated. Florida claimed high numbers — Tampa registered 37% of its sales in cash, while West Palm Beach came in at 48% and Miami 41%.
A little closer to NYC, in Nassau and Suffolk counties, almost half of all homes purchased since 2020 were bought in cash. Areas like Philadelphia, Pa., and New Brunswick, N.J. measured in at 37% and 31.9% respectively in 2022.
Where does that leave bidders who need the help of a bank to finance their purchase?
“FHA loans, which typically allow for lower down payments, have ticked up in popularity in response to the slowdown in housing-market competition,” Redfin noted, detailing government-backed mortgages insured by the Federal Housing Administration.
But even though FHA loans are available — which require lower minimum credit scores and down payments than many conventional loans — the site said that affluent all-cash buyers are still in a more financially advantageous situation, because they don’t need to take out a loan with a 6%-plus mortgage interest rate.
“All-cash purchases are prevalent with today’s affluent buyers, largely because mortgage rates have doubled from a year ago,” Redfin noted. “Buyers who don’t use loans avoid high-interest payments that exacerbate home prices, which remain near record highs.”
“Americans who sell a home in a pricey place like San Francisco may use equity to pay cash in a more affordable area, like Las Vegas,” Redfin concluded.
The full Redfin report can be found here.