Thomson Reuters
- In the past six months, nearly a third of US homebuyers have made purchases with all cash.
- That's largely due to buyers looking to sidestep the costs of rising mortgage rates.
- Commentators are divided on where US housing is headed, with some seeing a rebound in 2024.
Nearly a third of homebuyers have been paying for houses entirely in cash in order to avoid rising mortgage rates, according to the National Association of Realtors.
In the past six months, over a quarter of US homebuyers made all-cash purchases, according to NAR data. About 28% of sales were made entirely in cash in February, down slightly from the 29% of all-cash sales in January, the group said on Tuesday.
The large percentage of all-cash home purchases has been attributed to higher mortgage rates, which are still hovering around a 20-year-high. The rate on the 30-year fixed mortgage recently jumped past 7% for the second time in less than a year, raising the cost of borrowing and deterring some prospective buyers as home prices remain high.
With many on the sidelines, the largest share of current homebuyers are those between the ages of 68-76, NAR said, another factor that's contributed to rising all-cash sales.
"When looking at the buyers who are able to pay all cash, it tells a bleaker story and a story of those who hold the cards in the housing market and those who do not," NAR's deputy chief economist Jessica Lautz said in a statement.
Banks are also losing out amid higher mortgage rates. Certain mortgage providers lost money for each home they financed in 2022, according to a recent report from the Mortgage Bankers Association, the first time mortgage lenders saw losses since the MBA began recording the data in 2008.
But mortgage rates could come down in the coming year as interest rate volatility wanes, with the Federal Reserve expected to pause short-term interest rate hikes later this year. Central bankers have raised interest rates over 1,700% in the past year to control inflation, a factor that helped push mortgage rates higher.
Rates on the 30-year fixed mortgage could fall to 5.3% by the end of the year, according to an estimate from the MBA. And while experts are divided on the outlook for US housing in 2023, NAR senior economist Nadia Evangelou previously told Insider she saw 2023 as a pivotal year for the market, with a housing rebound coming in 2024.