US Homebuyers Are Increasingly Paying Cash, Dominating Some Markets

There is an increase in cash homebuyers in the US.

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A real estate data analytics firm, Attom, has discovered that the share of all-cash transactions rose last year to its highest level since 2013, while institutional investors, who usually account for many cash sales, have been declining, according to the data. This would suggest that there are more regular buyers who have turned to self-financing as a means of avoiding punishing mortgage rates.

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In particular, it is especially true in the Southeast, where most of the 13 cities with a cash share of more than 50% in the Attom data last year are located. With 72% of the vote, Augusta, Georgia, is known as the home of the US Masters golf tournament, which is held there every year.

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The Realtors in the area say that many individuals who would have been priced out by Wall Street money a year ago are now able to step into the market, particularly those buyers who have made a profit selling property in more expensive parts of the country. 

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“The majority are retirees or people who have sold something in other parts of the country and have made a lot of money from it and have the cash to pick up something here,” Heather said in response to a question. Redfin Corp. realtor Kruayai is based in Jacksonville, Florida, where median home prices are much lower than in California.

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Kruayai receives about half of its offers from individuals nowadays.

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Besides high mortgage rates, there are two major factors in play today that can explain the dramatic increase in cash sales in recent years. The Sun Belt states remain relatively affordable as compared with the Northeast and West Coast, which gives people who sell there an edge over their competition - and more cash to spend. The sudden turn in the market last year caused institutional investors to pull back from once-hot markets, as a result of being burned by the sudden turn in the market.

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In spite of rising interest rates and a cooling market, home sales dropped last year as prices fell from pandemic-fueled highs. The number of investor purchases fell by a record 46% in the fourth quarter of 2022 as compared to a year earlier, according to a report published by brokerage Redfin. 

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Approximately 53% of all homes sold in Atlanta in the past year were paid in cash, according to data from Attom. Redfin realtor Jasmine Harris said she is seeing a number of people who have sold their California homes for half a million or a million dollars, and purchased an Atlanta property for about $400,000.

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“This enables them to take part in a cash game that they would otherwise not be able to participate in,” she said. 

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It was only in Augusta that the all-cash share was higher than any other place in the state, which is located about two hours east of Atlanta. There is a large difference between the median sales price for a house in that city, which is about $200,000, and the national average, according to information collected by Attom.

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“In the Augusta metro area, the relatively good home flipping market could contribute, at least in part, to the high cash sales levels in the metro area,” said Rob Barber, chief executive officer of Attom.

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Augusta, a city with a military base, a university, and a power plant, has recently attracted investors to the area hoping to make a profit from the demand for rentals, says Clay Turner, a realtor, and broker in the city.

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“It was Wall Street money that sparked all this craziness in the first place," Turner said. “It has become more common for investors to manage their properties rather than expand them in order to maximize their profits. In our market, we seem to have settled down from that little flash in the pan.”

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The problem isn't just confined to the southern states. Last year, Attom data showed that institutional investors' share of sales in Las Vegas declined, while all-cash sales continued to increase despite the drop in institutional investors. 

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'We don't see hedge funds purchasing anymore,' said Shay Stein, a real estate agent for Redfin in the area, who works with hedge funds in the area. “The market is unpredictable. That's why I think a lot of investors are wondering what's going to happen to the market."

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Regular buyers, including those who are interested in buying a second home, a traditional driver of cash sales, are able to take advantage of these opportunities.

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The Jacksonville realtor Kruayai recently sold a property in northeast Florida to Jere Singer, a recent cash client of his. It had been almost a year since the 57-year-old business owner from Georgia had been searching for a vacation property that would suit her needs, and when she found the perfect property, she decided to use the inheritance to make the purchase. 

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"As far as prices and mortgage rates were concerned, the market conditions were not very good," said Singer. “It was a good location, so I took advantage of it right away.”

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