All-cash sales remain a viable option for homebuyers, with Redfin finding that cash home purchases reached their highest level since 2014 in April. According to the report, 33.4 percent of U.S. home purchases were made in cash in April, up from 30.7 percent a year earlier.
Redfin explains that elevated mortgage rates are deterring homebuyers who take out mortgages more than they’re deterring all-cash buyers. Overall home sales were down 41 percent from a year earlier in April in the metros included in this analysis, compared with a 35 percent decline for all-cash sales.
“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.
“Buyers who can’t afford to pay in all cash also have two potential—but different—paths,” Bokhari continued. “They can avoid a high mortgage rate by dropping out of the housing market altogether, or they can take on a high rate. That discrepancy is the reason the all-cash share is near a decade high even though all-cash purchases have dropped: Affluent buyers have the choice to pay cash instead of dropping out of the market.”
Also of note from the Redfin report, the typical U.S. homebuyer’s down payment was $52,500 in April, down 18 percent from a year earlier. That’s the second-biggest drop since May 2020.