Paying Cash For Your New Home Is Latest Trend To Edge Out Competitors

Model of cardboard house with key and dollar money.
Julia Sudnitskaya / Shutterstock.com

According to the National Association of Realtors, the share of all-cash sales to existing home sales surged to 25% in April 2021 as non-first time buyers paid all cash to increase the competitiveness of their offers. This was a strategy to edge out first-time homebuyers, and the tactic paid off. The NAR claims this is a significant increase, from the 15% share one year ago and the 20% share in 2019.

See: Lumber Prices Are Down but Homebuyers Still Aren’t Saving
Know: What You Need To Do Now To Buy a Home in 1 Year, 2 Years or 5 Years

Despite low mortgage rates, there is an unprecedented number of cash buyers, they add. There could be several reasons for this in such a tumultuous market. Those who already owned homes, were not in need of a new mortgage and sitting on years-long pent up cash could simply be jumping on a hot market to escape populated areas. Entering the market early with cash could have also present a selling opportunity later on in the year as prices surged.

The data shows that these aren’t just vacation homes that are being grabbed up in cash, either. The NAR data highlights that the share of cash buyers among primary residence buyers has also significantly increased. In April of both 2018 and 2019, 12% of primary residence buyers made all-cash purchases, but the share has increased to 15% as of April 2021.

Building Wealth

More: Real Estate Purchases Just Got Easier for First-Time Homebuyers With Student Loan Debt

The share of cash in general has increased, as well. Overall, homebuyers have been putting down higher down payments in order to compete. The NAR added that among homebuyers who obtained a mortgage, 50% put down less than 20%. In prior years, this figure was closer to 55-60%.

The type of home is also affecting the level of competitiveness and percentage of cash buyers. CNBC reports that cash purchases have increased on the very low end (homes up to $100,000) and on the very high end (homes 1 million and up), whereas the middle market priced homes have either remained flat or slightly decreased by level of cash purchase.

Take Our Poll: Should You Buy a Home During a Housing Bubble?
Find: Why Gen Z Should Be Optimistic About Homeownership

While the share of cash purchasers is varied and might not suggest improved cash balances, it shows unrelenting demand for a housing market that is still very much so on the rise. The competitiveness is so great that startups like Ribbon and Reali have popped up in order to help homeowners make an all-cash bid. The companies manage and compare different offers and help both agents and buyers land offers by backing cash offers when mortgage companies fall through, allowing them to edge out the competition.

Building Wealth

More From GOBankingRates:

Last updated: July 21, 2021

About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.