(NEXSTAR) – It’s been nearly a decade since the percentage of all-cash home purchases was this high, but you may not want to start stocking away savings in hopes of doing the same.
Real estate brokerage Redfin found that 33.4% of buyers opted for an all-cash deal in April, the highest that mark has been since 2014.
“All-cash purchases are making up a bigger portion of the homebuying pie for one major reason: Elevated mortgage rates are deterring homebuyers who take out mortgages more than they’re deterring all-cash buyers,” the study found. “Overall home sales were down 41% from a year earlier in April in the metros included in this analysis, compared with a 35% decline for all-cash sales.”
The analysis was based on county records going back to 2011 in the 40 most-populous U.S. metropolitan areas.
The average 30-year fixed rate for a mortgage as of June 8 is 6.71%, according to Freddie Mac, so it’s not surprising that buyers who are able to do so would opt to sidestep the historically high rates.
But what about a prospective home buyer?
“In all honesty, it’s very unlikely that a first-time homebuyer would be in a scenario where they can pay all cash,” Jessica Lautz, National Association of Realtors deputy chief economist and vice president of research, told Nexstar. “So I think having that expectation really means saving for a lifetime.”
Lautz added that the typical first-time homebuyer has a down payment of 6-7%.
“They’re taking advantage of low down payment programs like VA loans or FHA loans and entering into homeownership with a smaller down payment,” Lautz said, referring to the affordable government-backed mortgage loans.
So who’s paying all-cash?
The city where all-cash purchases were the most common in April was Cleveland, Ohio, Redfin found, followed by West Palm Beach, Florida, and Baltimore.
Three metros along the West Coast, where home prices have soared in recent years, saw the least all-cash deals: San Jose, California; Seattle; and Oakland; California, respectively.
“A homebuyer who can afford to pay in all cash is weighing two potential paths,” said Redfin Senior Economist Sheharyar Bokhari. “They can use cash to pay for the home and avoid high monthly interest payments, or take out a loan and pay a high mortgage rate. In that case, they could use the money that would have gone toward an all-cash purchase to invest in other assets that offer bigger returns, which could partly cancel out their high mortgage rate.”
Baby Boomers make up the largest share of those buyers, Lautz said in an April report, with more than half of people age 58 to 76 paying in all cash.
“Homeowners have really been the winners in that scenario … they have equity and are able to make a move with paying all cash,” Lautz said.
Another trend that stood out in the data – single women are the most likely to pay in all-cash, Lautz found.
“Single women can be coming from a past marriage, whether they are recently widowed or divorced, and so they may be moving actually from a family home into their own property for the first time and so as they make that purchase, they are more likely to pay all cash and not have to take on a mortgage.”
Lautz added that in that scenario a move out of a larger, family home could mean a transition into a smaller property.
When it comes to the race of all-cash buyers, Lautz found that 23% were white/Caucasian, 15% Black/African-American and just 8% Asian/Pacific Islander or Hispanic/Latino.