Cash offers for homes reach near decade high in September
FILE-A for sale sign hangs in front of a home on August 22, 2023 in San Mateo County, California. (Photo by Liu Guanguan/China News Service/VCG via Getty Images)
Over 30% of homebuyers are paying cash, allowing them to skirt interest.
In September, about 34.1% of home purchases in the U.S. were all cash, which is up from the 29.5% reported a year earlier, according to data from technology-powered brokerage Redfin.
September also marked the highest share of all-cash purchases in nearly 10 years, the brokerage reported.
Redfin reported that all-cash purchases haven't been this common since 2014 when affluent buyers and corporate investors led the housing market recovery after the housing bubble burst in 2008.
HOMEBUYERS NATIONWIDE FEELING THE IMPACTS OF RISING INTEREST RATES
For those that can afford it, buying a home in cash becomes more attractive in a market where mortgage rates are hovering under 8%.
FILE-A house is seen with a "For Sale" sign on in Pasadena, California. (Photo by David McNew/Getty Images)
In September, when the number of cash purchases reached a near decade high, the weekly average 30-year fixed mortgage rate hit 7.2%, which was the highest level in two decades. In October, rates neared 8%, forcing monthly mortgage payments up about 20% from a year ago, the brokerage reported.
Although rates have eased slightly, sitting at 7.88% for a 30-year fixed rate as of Nov. 8, they are still more than double the levels seen during the early days of the pandemic.
US HOUSING MARKET: EXPERT SAYS ‘ALL HOPE IS NOT LOST’ FOR POTENTIAL HOMEBUYERS
These rates are "exacerbating inequality between people who own homes and people who don’t," Redfin Senior Economist Sheharyar Bokhari said.
Today prices for homes are up 40% compared to before the pandemic buying boom, and borrowing rates "made the divide even bigger by adding more to monthly payments," Bokhari said.
Homeowners who are being pushed out of the market due to high prices and rates "not only can’t afford a home now, but they’re not building wealth through homeownership for the future," Bokhari added.
In fact, economists project 2023 will mark the slowest home sales year since the housing bubble burst in 2008.