Nearly a third of all homes in the US are bought with cash — and while that trend has eased slightly since earlier this year, it’s still higher than it was before the COVID-19 pandemic drove the housing market insane.
That’s according to a Redfin report published Friday, which found that 31.4% of U.S. home purchases in July were paid for with cash. That’s still pretty close to an eight-year peak reached earlier this year, in February, at just over 32%, and up from 27.5% a year earlier.
“The share of cash purchases surged in early 2021 during the pandemic-driven home buying frenzy and has remained high since then,” the report said.
Redfin analyzed county records in 41 of the most populous US metropolitan areas, dating back to 2011, with July being the most recent month with data available.
Why are there so many cash buyers?
Mortgage rates rose above 6% this week for the first time since 2008. This is not an ideal time to seek financing for a home purchase – so any buyer would probably prefer to pay cash if they are able to.
However, during the pandemic housing hype, when mortgage rates were below 3%, cash buyers (along with everyone else) flooded the market (along with everyone else).
But this was also a time when competition in the home buying arena was at an all-time high. Buyers faced bidding wars and struggled to stand out from sometimes dozens of other offers. All-cash offers were another way buyers differentiated.
It also comes down to an important part of why the housing market burned so hot during the pandemic. The sudden jump to remote work allowed Americans to reevaluate their lives, sell and use cash to buy homes in new areas.
“It allowed a record share of homebuyers to move,” notes Redfin, “often from expensive to affordable parts of the country. Home values in the US have skyrocketed since the start of the pandemic, meaning Americans who own a home in an expensive place like San Francisco, possibly using equity to pay cash in a more affordable area like Las Vegas.”
Investors are also contributing to the increase in the number of cash buyers. Of the homes sold in the U.S. in the first quarter of 2022, 28% were bought by investors, according to a recent report from Harvard University’s Joint Center for Housing Studies. The report also found that investors have captured a “record share” of single-family homes — with a spike in investor purchases beginning shortly after COVID-19 hit the US
Still, investors continue to buy more homes than before the pandemic. In the second quarter of this year, they bought 87,500 homes in the US, up 5.9% year over year, according to an August report from Redfin.
Where are cash buyers most common?
Think of the type of people most likely to buy a house with all the money: the ultra-rich. Now consider where they are most likely to live.
New York.
Long Island, New York — home to the Hamptons — is in Nassau County, the metro with the highest share of all cash buyers in July: 66.5%, according to Redfin.
The next two highest subways are both in Florida: West Palm Beach (56.4%) and Jacksonville (45.5%).
Here is a ranking of Redfin’s top 10 most cash buyer rich housing markets.
- Nassau County, New York — 66.5%
- West Palm Beach, Florida — 56.4%
- Jacksonville, Florida — 45.5%
- Milwaukee, Wisconsin — 45.3%
- Fort Lauderdale, Florida — 43.3%
- Orlando, Florida — 42.5%
- Atlanta, Georgia — 42.4%
- Cleveland, Ohio — 42.1%
- Charlotte, North Carolina — 42.1%
- Tampa, Florida — 41.3%
Where are cash buyers least common?
Now look west. Three high-priced markets in California and Washington have the lowest share of buyers in cash, according to Redfin’s report, “partly because high prices make it harder to pay in cash.”
Here’s a ranking of the subways with the lowest share of cash buyers in July.
- Oakland, California — 15.1%
- San Jose, California — 16%
- Seattle, Washington— 16.7%
- Washington, DC — 17.5%
- Pittsburgh, Pennsylvania — 17.8%
- Virginia Beach, Virginia — 18%
- Los Angeles, California — 19.6%
- Newark, New Jersey — 19.9%
- San Diego, California — 20.1%
- Portland, Oregon — 20.4%
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