All-Cash Home Purchases Hit 7-Year High

All-cash purchases represented 30% of all sales in the U.S. so far this year.

With a fast-paced housing market, most buyers are facing competition and all-cash offers are seeing an increase in transactions, even with low mortgage rates. The last time all-cash offers reached this high of a rate was 2014, when 30.6% of home purchases were all-cash transactions, according to Redfin. Last year, all-cash purchases made up just 25.3% of all transactions. Over the last two decades, the peak was 2012 and 2013, when all-cash purchases hit 34.1% both years, while the low was 2006, when all-cash offers represented just 21.6% of transactions.

The report also found that many investors are reentering the market after a hiatus, most likely due to concern over the pandemic. Due to the nature of the business, investment properties are almost always purchased with all cash. Investment transactions jumped 2.7% year over year and investors were responsible for 14.9% of every purchase in the first quarter of 2021. Specifically, the purchase of high-end homes by investors rose nearly 20% year over year in the first quarter, while their purchase of mid-priced homes increased 12.7% and their purchase of low-priced homes dropped 9.2%.

However, with an increase of all-cash purchases and continued low inventory on the market, many potential buyers who cannot afford an all-cash offer are being shut out. According to the Mortgage Bankers Association, despite record low interest, mortgage applications are generally decreasing week to week and year over year. Additionally, more than half of homes in May sold above asking price. While this may lead buyers who need financing to feel frustrated, they should be prepared to move quickly with offers.

“Many Realtors® are seeing cash sales in all types of property purchases; not only for investments and second homes, but many buyers, particularly first-time purchasers, are feeling the effects of more capital in the marketplace. This trend will likely continue as the real estate market continues to rage with high buyer demand, shrunken inventory levels and interest rates remaining extremely low. Buyers have to continue to remain positive and stay ready for upcoming homes that become available,” said PAR President Christopher Raad.