Last year, nearly a third of U.S. homes were purchased with cash, according to data provided by the realty company Redfin. That’s an 8 percent increase from 2021, continuing a trend that started during the pandemic. The share of homes bought with cash is now at levels not seen since 2014, when the housing market was on the rebound after the foreclosure crisis and the Great Recession.
The rise of all-cash buys comes at a time when the average home buyer is increasingly likely to be white, wealthy and older, and the proportion of first-time buyers is at its lowest in more than 40 years. Redfin defined an all-cash purchase when the mortgage value on the property sold is zero.
“Only the wealthy are essentially buying homes,” said Lawrence Yun, chief economist at National Association of Realtors. “If this trend was to continue, that means something fundamentally is wrong with society.”
The trend isn’t happening equally across the country. In Washington, D.C., and its immediate surroundings, almost a fifth of homes purchased in 2022 were bought with cash. Forty miles north in Frederick, Maryland, that rate nearly doubles.
Early in the pandemic, home buyers seeking more space desperately outbid one another in the frenzied housing market. Now all-cash offers continue, even as the housing market has cooled, as a way to sidestep rising interest rates.
“What we found was those that already were more well-off were able to take advantage of the strong housing market and add to their wealth, while those trying to better their situation were often pushed to the side,” said Ali Wolf, chief economist at Zonda, a housing data and consulting firm.
Retirees, buyers who relocated using home equity proceeds, foreign buyers, investors and high-wealth individuals all outgunned bidders who needed the help of banks to finance their offers, real estate experts said.
A suburban renaissance
Frederick and Montgomery counties in Maryland are home to about 1.3 million people. Since 2017, the share of all-cash buys has more than doubled, the largest increase in the country. Last year, nearly 2 of every 5 homes in the area were bought in cash, as changes to workplace norms unleashed by the pandemic reshaped the housing market.
“You can buy a single-family home in Frederick for what it would cost you to buy a two-bedroom condo in D.C.,” said Jed Williams, owner of Hagan Realty. The average price per square foot of homes in Frederick is $211, according to Redfin, whereas in D.C. space costs more than twice as much, at $488 per square foot.
The surge in wealthy people from D.C. and its inner suburbs moving to the Frederick area, and the boost in property values they sparked, created an attractive long-term opportunity for investors, Williams said. They targeted more modestly priced homes, he said, which have greater potential to appreciate as the demographics of an area become more affluent.
Changing work norms have affected other suburban markets and areas outside large city centers. Since 2020, almost half of all homes in Nassau and Suffolk counties, which are located just east of New York City, were purchased in cash.
In the pandemic, “people valued their homes so much more,” said Victoria Monahan, a licensed real estate salesperson with Keller Williams Greater Nassau on Long Island. Homeowners in Manhattan turned to Nassau County so they could have a yard, an at-home office or just extra space, she said.
The pandemic also reoriented people’s values toward activities that required more land, Monahan said, such as hosting friends, gardening and swimming in backyard pools. And the all-cash trend continues to rise in the area, as more than half of all homes in Nassau and Suffolk counties last year were cash buys.
Chasing the warmth
In the last six years, South Florida has consistently been one of the top places for homes bought with cash. The state’s tax incentives, permissive response to the pandemic and political culture have accelerated the rush of home buyers who can afford to purchase property without a mortgage.
The typical resident in the city of Naples is 66 years old and the median household income is $125,000, according to the Census Bureau’s 2021 American Community Survey. And the city has historically drawn a higher share of all-cash purchases because of the affluent clientele the area attracts, said Renee Hahn, a luxury real estate professional with William Raveis Real Estate.
After a small dip three years ago, the percentage of homes bought entirely with cash in Naples has reached a new high at 56 percent.
The influx of all-cash deals has caused the displacement of longtime locals, said Ashley Lisea, a real estate agent in southwest Florida. The increased home property values have also raised the cost of living in the area.
“For the past two years we have been in a multiple offer situation,” she said. “People who are middle class don’t have the cash to buy straight out.”
Retirees seeking warmer climates, but without the intensity of the Florida sun, have also used cash to scoop up houses in other cities across the country. In Lexington, Kentucky, half of all home purchases last year were all cash. Roger Browning, owner of Four Seasons Realty, said the city has attracted retirees from the Midwest and residents from California because of its modest home prices, low state taxes and mild climate.
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Can always count on WAPO to throw in unsupported useless racial and social justice claims on a topic. Good to know the wealthy can buy stuff the rest of us can’t. That journalism in 2023.