Are all-cash patrons dominating NYC actual property market?

STATEN ISLAND, N.Y. — New real estate data and reporting recently revealed that nearly a third of U.S. homebuyers are sidestepping a mortgage and purchasing property via cash-only transactions. Offbeat and atypical, it’s a trend that is suddenly dominating big cities like Atlanta, Ga., and Jacksonville Fla., where 41% and 49% of deals are handled mortgage-free, respectively.

But what about the NYC metro area? In a densely populated locale, where home prices tend to exceed national norms, is this unconventional method of buying a reality? According to the data, it most certainly is happening here.

“Only the wealthy are essentially buying homes,” Lawrence Yun, chief economist at National Association of Realtors, recently told the Wall Street Journal, responding to data provided by the realty company Redfin, which indicates a sudden rise in all-cash sales.

Redfin’s report, which noted that the share of homes bought with cash is now at levels not seen since 2014, detailed the share of all-cash home purchases in major U.S. cities in 2022 vs. the share of mortgaged homes using FHA, VA and conventional loans.

According to the stats, 31% of home sales in NYC were loan free.

“What we found was those who 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,” Ali Wolf, chief economist at Zonda, a housing data and consulting firm, told the Journal.

Retirees, buyers who relocated using home-equity proceeds, foreign buyers, investors and high-wealth individuals are the ones who are leading this charge, the real estate expert told the media outlet, using all-cash offers as a way of sidestepping rising interest rates.

The trend isn’t happening equally across the country, but more accurately in pockets, the Journal reported. Florida claimed high numbers — Tampa registered 37% of its sales in cash, while West Palm Beach came in at 48% and Miami 41%.

A little closer to home, in Nassau and Suffolk counties, almost half of all homes purchased since 2020 were bought in cash. And areas like Philadelphia, Pa., and New Brunswick, N.J. measured in at 37% and 31.9% respectively in 2022.

But where does that leave bidders who need the help of a bank to finance their purchase?

“FHA loans, which typically allow for lower down payments, have ticked up in popularity in response to the slowdown in housing-market competition,” Redfin noted, detailing government-backed mortgages insured by the Federal Housing Administration.

But even though it’s easier for buyers to now use FHA loans — which require lower minimum credit scores and down payments than many conventional loans — the site said that affluent all-cash buyers are still in a more financially advantageous situation, because they don’t need to take out a loan with a 6%-plus mortgage interest rate.

And this gives good reason for the all-cash trend to continue.

“All-cash purchases are prevalent with today’s affluent buyers, largely because mortgage rates have doubled from a year ago,” Redfin noted. “Buyers who don’t use loans avoid high interest payments that exacerbate home prices, which remain near record highs.”

And because U.S. home values have skyrocketed, longtime homeowners are taking advantage of the rise and relocating to more affordable cities.

“Americans who sell a home in a pricey place like San Francisco may use equity to pay cash in a more affordable area, like Las Vegas,” Redfin concluded.

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