The myth about home buying is that everyone makes a 20% down payment and then takes out a mortgage. This financial model has become more expensive recently. Mortgage rates, which were about 3% two years ago on a 30-year fixed loan, have moved to 7%.
The National Association of Home Builders did an analysis that shows just how expensive mortgages have become on a dollar basis. Purchasing a home sold for $450,700, about the median price in America, meant a monthly payment of $1,925 in January 2022 on a 3% mortgage. That rose to $2,923 last October at a rate of 7%.
According to real estate firm Redfin, more people have recently turned to paying cash for homes. The research was based on county-level data across the 40 largest US metros based on population. In February, 34.5% of home purchases were cash deals, the second-highest monthly number in the last decade. The highest month for that period was November of 2023 when the number was 34.8%.
The number of all cash deals varies considerably from market to market. Part of this is based on the markets where median home prices are the highest. However, the reason for the trend is the same across the nation. Redfin’s experts wrote, “Some homebuyers are paying in cash for the same reason others are taking out large down payments: elevated mortgage interest rates.”
In February, 54.4% of home purchases in Jacksonville were made with cash. Further south on the state’s Atlantic Coast, West Palm Beach had the second-highest rate nationwide, at 53.4%.
Cities where the fewest people make all cash purchases tend to be those with the highest median home prices. The number for San Jose was 18% in February, 21.6% in Oakland, 21.7% in San Diego, and 23% in Los Angeles.
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