Redfin reports over one-third of home purchases
in February were made in all cash—not far from the record high
(NASDAQ: RDFN) — The median down payment for U.S. homebuyers was
$55,640 in February, according to a new report from Redfin
(redfin.com), the technology-powered real estate brokerage. That’s
up 24.1% from $44,850 a year earlier—the largest annual increase in
percentage terms since April 2022.
The typical homebuyer’s down payment last month was equal to 15%
of the purchase price, up from 10% a year earlier.
This is based on a Redfin analysis of county records across 40
of the most populous U.S. metropolitan areas going back through
2011.
“Homebuyers are doing whatever they can to pull together a large
down payment in order to lower their monthly payments moving
forward,” said Rachel Riva, a Redfin real estate agent in Miami.
“The smallest down payment I’ve seen recently is 25%. I had one
client who put down 40%.”
Home prices rose 6.6% year over year in February, which is part
of the reason down payments increased; a higher home price
naturally leads to a higher down payment because the down payment
is a percentage of the home price. But elevated housing costs (from
both high prices and high mortgage rates) are also incentivizing
buyers to take out larger down payments.
A bigger down payment means a smaller total loan amount, and a
smaller loan amount means smaller monthly interest payments. For
example, a buyer who purchases today’s median-priced U.S. home
($374,500) and puts 15% down would have a monthly payment of $2,836
at the current 6.79% mortgage rate. A buyer who puts 10% down on
that same home with that same rate would have a monthly payment of
$2,968. That’s $132 more per month, which adds up over the course
of a mortgage. Mortgage rates are down from their October peak of
roughly 8%, but are still more than double the all-time low hit
during the pandemic.
Over 1 in 3 Home Purchases Are Made With Cash—a Near Record
Share
Over one-third (34.5%) of U.S. home purchases in February were
made with all cash, up from 33.4% a year earlier. That’s just shy
of the 34.8% decade-high hit in November, and isn’t far below the
record high of 38% hit in 2013.
Redfin defines an all-cash purchase as a home purchase with no
mortgage loan information on the deed.
Some homebuyers are paying in cash for the same reason others
are taking out large down payments: elevated mortgage interest
rates. While a large down payment helps ease the sting of high
rates by reducing monthly interest payments, an all-cash purchase
removes the sting altogether because it means a buyer isn’t paying
interest at all.
Most buyers, though, can’t afford to pay in cash, and many can’t
afford a big down payment either. First-time buyers, especially,
are at a disadvantage in today’s market. That’s because they don’t
have equity from the sale of a previous home to bolster their down
payments, and are often competing against all-cash offers, which
sellers tend to favor. Many all-cash offers come from investors,
who were buying up more than one-quarter of the country’s
low-priced homes as of the end of last year. Overall, though,
investors are purchasing far fewer homes than they were during the
pandemic housing boom.
“High mortgage rates are widening the wealth gap between people
of different races, generations and income levels,” said Redfin
Economics Research Lead Chen Zhao. “They’ve added fuel to the fire
lit by surging home prices during the pandemic, creating a reality
where in many places, wealthy Americans are the only ones who can
afford to buy homes. Meanwhile, people who are priced out of
homeownership are missing out on a major wealth building
opportunity, which could have financial implications for their
children and even their children’s children.”
FHA Loans More Popular Than They Were During Pandemic Because
the Market Is Less Competitive
Roughly one in six (15.5%) mortgaged U.S. home sales used an FHA
loan in February, up from 14.9% a year earlier and just shy of the
16.3% four-year high hit a month earlier. FHA loans are more common
than they were during the pandemic homebuying boom (they
represented 12.1% of mortgaged sales in February 2022) because the
market today is less competitive.
Roughly one in 14 (7%) mortgaged home sales used a VA loan in
February, down from 8% a year earlier. The share of home sales
using a VA loan typically doesn’t change much over time, though it
fluctuated more than usual during the topsy-turvy pandemic
market.
Conventional loans are the most common type, representing over
three-quarters (77.5%) of mortgaged home sales in February, up
slightly from 77.1% a year earlier. Jumbo loans—used for higher
loan amounts and popular among luxury buyers—represented 5.3% of
mortgaged sales, compared with 4.7% a year earlier.
Metros with biggest increases/decreases in down payment
amounts
In Las Vegas, the median down payment jumped 60.9% year over
year—the largest increase among the metros Redfin analyzed. Next
came San Diego (49.8%), Charlotte, NC (47.4%), Virginia Beach, VA
(45%) and Newark, NJ (32.2%). Down payments only fell in two
metros: Milwaukee (-13.9%) and Pittsburgh (-0.4%).
Metros with highest/lowest down payment percentages
In San Francisco, the median down payment was equal to 25% of
the purchase price—the highest among the metros Redfin analyzed. It
was followed by San Jose, CA (24.9%) and Anaheim, CA (21.9%). The
following metros all had median down payments of 20%: Fort
Lauderdale, FL, Los Angeles, Miami, Montgomery County, PA, New
Brunswick, NJ, New York, Oakland, CA, Sacramento, CA, San Diego,
Seattle and West Palm Beach, FL.
Down payment percentages were lowest in Virginia Beach (1.8%),
Detroit (5%), Pittsburgh (5%), Baltimore (5%) and Philadelphia
(7.3%).
While the Bay Area has among the most expensive home prices, it
also has a high concentration of wealthy residents, many of whom
can afford large down payments. Meanwhile, Virginia Beach is at the
bottom of the list because it has a high concentration of veterans,
many of whom take out VA loans, which require little to no down
payment.
Metros where all-cash purchases are most/least common
In Jacksonville, FL, 54.4% of home purchases were made in
cash—the highest share among the metros Redfin analyzed. Next came
West Palm Beach (53.4%), Cleveland (48.8%), Fort Lauderdale (46.2%)
and Atlanta (46.1%). These metros are popular among investors, who
often pay in cash.
All-cash purchases were least common in San Jose (18%), Oakland
(21.6%), San Diego (21.7%), Los Angeles (23%) and Providence, RI
(23.3%).
Metros with biggest increases/decreases in share of all-cash
purchases
In Atlanta, 46.1% of home purchases were made in cash, up 12.5
percentage points from a year earlier—the largest increase among
the metros Redfin analyzed. It was followed by Jacksonville (8
ppts), Oakland (6.2 ppts), Portland, OR (5.7 ppts) and New
Brunswick (5.2 ppts).
In Columbus, OH, 28.5% of home purchases were made in cash, down
6.1 percentage points from a year earlier—the largest decrease
among the metros Redfin analyzed. Next came Cincinnati (-4.4 ppts),
Philadelphia (-3.3 ppts), Chicago (-3.3 ppts) and Phoenix (-2.8
ppts).
To view the full report, including charts and metro-level data,
please visit:
https://www.redfin.com/news/all-cash-homebuyers-february-2024
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We run
the country's #1 real estate brokerage site. Our customers can save
thousands in fees while working with a top agent. Our home-buying
customers see homes first with on-demand tours, and our lending and
title services help them close quickly. Customers selling a home
can have our renovations crew fix it up to sell for top dollar. Our
rentals business empowers millions nationwide to find apartments
and houses for rent. Since launching in 2006, we've saved customers
more than $1.6 billion in commissions. We serve more than 100
markets across the U.S. and Canada and employ over 4,000
people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity
Home Loans®, Rent.™, Apartment Guide®, Title Forward® and
WalkScore®.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240329717079/en/
Redfin Journalist Services: Ally Braun, 206-588-6863
press@redfin.com
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