Surge in All-Cash Home Purchases

An increasing number of home buyers are paying in cash, with the rate of cash purchases doubling over the past year. According to the most recent housing data, published by RealtyTrac last month, more than 42 percent of new home sales in the United States took place as all-cash purchases. Analysts believe there are number of reasons for the surge in all cash home buying.

The first is the rising cost of borrowing. Although mortgage rates remain near all time lows, last year, interest rates for new mortgages began a resurgence to reach a two year high. This increased cost of borrowing have made mortgages a less enticing option.

Another cause for the increase is the number of individual and institutional investors buying up large numbers of homes with the goal of renting them out and later selling them when the market conditions are more favorable. These investors represented roughly 20 percent of cash home purchases in the month of December, and more than 8 percent of total home sales.

Finally, their are simply many who would like to take out a mortgage loan, but can’t. In the aftermath of the housing collapse, banks are holding a tight grip on their money. These more stringent lending practices are keeping many would-be home buyers at bay.

cash home sales infographic

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