Since interest rates began climbing in 2022, the share of buyers paying cash for homes has increased, reaching 41.1% in the first quarter of 2024. This trend is driven by buyers seeking to avoid financing costs and those who can afford to skip financing being more active in the market. While cash sales are common in high-end markets, they are also growing in smaller, more affordable markets and fringe areas around migration hubs like Atlanta.
In nine U.S. metros, over 60% of home sales were paid in cash during the first quarter. These areas include Naples, Florida; Myrtle Beach, South Carolina; Lebanon, New Hampshire; and cities around Atlanta like Macon and Walter Robbins. Birmingham, Alabama, had the highest share of all-cash sales at 70%, with a 52% increase from last year. Other markets with significant cash sales include Huntington, Alabama; Fayetteville, North Carolina; and Chico, California.
There is a strong connection between home prices and cash sales, with higher levels of cash deals in lower-priced markets. At least 40% of sales in areas where homes typically sold for less than $225,000 were cash deals, but this was true for only one-third of metros where median home prices topped $450,000. Affordability and in-migration from higher-cost coastal cities are major factors driving cash sales in these areas.
Institutional buyers also contributed to the increase in all-cash deals, purchasing 10-12% of homes during the quarter. Post-pandemic migration patterns provided a secondary boost in places like Chico, California, and Salem, Oregon. The outer ring of cities around Atlanta, such as Macon, Walter Robbins, Gainesville, and Athens, also saw significant increases in cash sales, with at least 56% of homes sold in cash.
The rise in all-cash deals can drive up prices, as buyers may be willing to pay more to compete with cash offers. Additionally, increasing down payments are giving buyers an advantage in competitive markets.
Thanks for reading,
Chris
