All-Cash Home Purchases Fall to Lowest Level in Three Years: Report
Last year, four of the five metropolitan areas with the highest percentage of cash home purchases were located in Florida.
Data from Redfin, a real estate brokerage, reveals that the proportion of buyers acquiring properties through all-cash transactions fell year-over-year in the United States. This decline is attributed to investors acquiring fewer properties due to elevated prices and mortgage rates. Investors constitute a substantial share of individuals engaging in cash purchases.
According to Redfin, cash transactions represented just over 32 percent of home purchases in 2024, a decrease from about 35 percent in 2023.
Redfin attributes this decrease to a reduction in property acquisitions by investors compared to previous years.
Given that investors make up a significant fraction of cash buyers, their interest level plays a crucial role in determining the volume of these transactions.
Declining investor interest is partly due to the challenges of purchasing homes and reselling them for substantial profits, as was more common during the pandemic. High property prices and mortgage costs have made the buy-and-flip strategy less attractive.
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Since then, however, prices have stabilized, with minimal growth of just 2.2 percent, bringing the average to $510,300 as of Q4 2024. This slowdown in price growth diminishes the attractiveness of properties for investors.
High mortgage rates present another obstacle. The average weekly rate for a 30-year fixed mortgage has maintained above 6 percent for over two years.
Despite the annual drop in the share of all-cash sales in 2024, these transactions still represent a larger proportion of home purchases compared to the pre-pandemic era, when the share fluctuated between 25 percent and 30 percent, according to the brokerage.
Sheharyar Bokhari, a senior economist at Redfin, linked the high rate of all-cash sales to transactions by affluent Americans. When home prices are elevated, as they currently are, individuals with substantial resources are more likely to buy properties outright compared to lower-income buyers.
Bokhari anticipates that the share of all-cash acquisitions will remain relatively stable this year unless mortgage rates decline significantly enough to spur a “substantial rise in sales.”
Among the 40 metropolitan areas monitored by the brokerage, West Palm Beach recorded the highest percentage of cash purchases last year at 49.6 percent.
Increase in Prices
In January, home prices saw a monthly increase of 0.6 percent and an annual rise of 5.4 percent, with the yearly growth being the slowest since August 2023, based on data from Redfin.
“The price growth observed in January primarily reflects homes that went under contract in December. Since then, we’ve noted a decrease in sales coupled with a rise in the number of homes being listed,” Bokhari remarked.
“This trend is likely to result in a slowdown in price growth in the future, as homes are staying on the market longer, and when they finally sell, they are going for nearly 2 percent below the list price—the largest discount seen in almost two years.”
Mortgage rates have shown a decline for the past five weeks for 30-year fixed-rate options, yet they remain close to 7 percent.
“On a positive note, buyers who can afford to purchase homes at current interest rates may have more time to weigh their options and greater leverage in negotiations.”
