Cash sales took a bigger role in the U.S. housing market last year as mortgage rates remained high and buyers competed for a limited number of homes for sale.
The share of houses and condos bought with cash hit an 11-year high, accounting for nearly 39% of all sales, according to data provided by Attom to Scotsman Guide.
Nearly 38% of single-family homes were bought with cash, also the largest share purchased with cash since 2013.
Cash tends to take a bigger role in the market when mortgage rates are high and the stock of homes for sale is low.
“The recent trends in all-cash and institutional investor home purchases probably have a lot to do with elevated mortgage rates, a low supply of homes for sale around the U.S. and a decline in foreclosures,” Attom chief executive officer Rob Barber said in an email Thursday.
Mortgage rates near 7% and roughly double what they were three years ago “raises the cost of borrowing and makes cash purchases more attractive,” Barber said.
Meanwhile, the supply of homes for sale is near a five-year low and distressed properties are down by a third compared to late 2023.
“Those forces stifle the source of properties available for investors, especially distressed properties that can often be had for a bargain,” Barber said.
“The bottom line here is that a combination of increased borrowing costs and tight supplies of homes for sale is likely combining to boost the portion of sales going to cash buyers and reducing levels of institutional investing.”
The actual number of cash sales dropped in 2024, however, following along with an overall decline in the number of U.S. home sales last year.
In 2024, there were about 1.28 million houses and condos bought with cash, down from 1.3 million in 2023 and from a peak of 1.8 million in 2021, according to Attom. In that peak year, however, cash sales only accounted for 34% of all home sales.
Cash played a bigger role in sales in some states than others last year. The highest share of cash sales was in Alabama where 54% of the transactions were all cash, followed by Hawaii at 51% and New York at 50.5%.
Markets with the lowest percentages of cash sales included Maryland (26%), Virginia (27%) and Iowa (28%).
Meanwhile, professional investors pulled back from the market last year. Institutional investors, or buyers of 10 or more properties in a year, purchased roughly 244,000 homes and condos last year, accounting for 6.3% of all sales, according to Attom. Wall Street investment funds tend to swoop into the marketplaces when home prices are depressed and distressed properties are plentiful.
The institutional buyer share was down from 6.9% in 2023 and from a peak of more than 9% in 2021, when large investors purchased around 585,000 houses and condos.
Daren Blomquist, vice president of market economics at Auction.com, said that decline has been noticeable at the online distressed-property marketplace. He said 3% of its buyers in the 2024 buyer survey said they were institutional investors, down from 4% the prior year. Blomquist added the more prominent role of cash “makes sense.”
“Cash buyers have less competition from financed buyers because higher mortgage rates are pushing down demand from those buyers,” Blomquist said. “Lower inventory means cash buyers have fewer options to choose from and so more properties are likely to have a cash buyer offer.”
