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Cash is king: Higher mortgage rates have translated into a bigger market share for all-cash buyers

An analysis by Parcl Labs shows all-cash homebuying levels in the nation's largest housing markets.

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The surge in mortgage rates over the past two years has coincided with a notable trend in the real estate market: All-cash buyers are becoming a larger share of home sales.

According to an analysis conducted by Parcl Labs, a leading residential real estate analytics firm, for ResiClub, all-cash buyers accounted for 33.5% of all home purchases in Q4 2023. This figure marks a significant increase from 23.8% recorded in the same quarter of 2021, a period during which mortgage rates hovered around 3%.

The data from Parcl Labs indicates that although overall home buying has slowed, with existing home sales reaching their lowest levels since 1995 in 2023, all-cash buyers haven't scaled back to the same extent. Consequently, all-cash now represents a larger portion of the remaining market.

The National Association of Realtors released its own analysis last month, finding that all-cash home buying, as a percentage of home sales, was up as more buyers carried over equity to avoid taking on these higher rates.

“These housing consumers owned a home, sold it and then they could purchase their next property without a mortgage,” wrote NAR deputy chief economist Jessica Lautz. “The freedom to make this purchase was likely due to the large amount of housing equity they have earned as home prices have increased in recent years.”

NAR also pointed to mom-and-pop investors.

Click here to view an interactive version of the chart below

Perhaps the most striking thing about Parcl Labs’ all-cash homebuying analysis is just how much it varies by market.

In Punta Gorda, Fla., and Flint, Mich., all-cash buyers made up a staggering 57.8% and 57.6%, respectively, of home sales in Q4 2023.

In Denver and Colorado Springs, all-cash buyers made up just 19.5% and 17.8%, respectively, of home sales in Q4 2023.

Another thing that’s interesting is that many housing markets tend to see all-cash homebuying peak seasonally every year during the winter months. Jason Lewris, co-founder of Parcl Labs, attributes that seasonal trend to investors.

“What was notable about Chicago to us, and I would expect to be present in similar seasonal markets, is the seasonality of all-cash buying itself. The percent of all-cash transactions seems to peak during the winter months. One take on this is investors know units available to purchase during off season are ones that want/need to move, and they can get even better deals showing up with all-cash on these units,” Lewris told ResiClub.

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