Ryan Serhant, CEO of SERHANT, explains that there isn’t just one housing market right now. Instead, there are four different markets: cash buyers, buyers who need a mortgage, homeowners holding onto low mortgage rates, and homebuilders. Each group is experiencing the market a little differently.
Today let’s focus on the first group: cash buyers.
According to the National Association of Realtors (NAR), 27% of homes sold in September were purchased with cash. That means more than 1 in 4 buyers didn’t need a mortgage. That’s a significant number, especially when so many buyers are still dealing with affordability challenges.
So where is all that cash coming from? You might assume it’s wealthy investors buying up homes, but that’s not always the case. Many cash buyers are actually homeowners who have built up enough equity in their current home to purchase their next one outright.
Here’s a closer look at who’s buying homes with cash and what that means for today’s housing market.
Who’s Paying Cash?
According to NAR, cash buyers generally fall into three groups:
Homeowners who sold their previous home and are using the proceeds to buy their next one
People purchasing a second home
Real estate investors
So, it’s not just the big investors you hear about on social media. That first group could include homeowners just like you. In fact, according to Cotality, the average homeowner with a mortgage has built up about $310,000 in home equity.
That’s a big advantage in today’s market. Many homeowners feel stuck because they don’t want to give up the low mortgage rate they already have. But once they realize they may have enough equity to buy their next home with cash, higher mortgage rates become less of a concern.
That’s because buying with cash means:
No monthly mortgage payments
No need to worry about today's mortgage rates
No loan approval process, which could help you close faster
And even if your equity isn’t enough to cover the entire purchase, using more of it toward your next home means you’ll need to borrow less. That could also help lower your monthly mortgage payment.
But cash buyers aren’t equally common everywhere. How much they influence your local housing market really depends on where you live.
For example, according to Realtor.com, cash buyers accounted for nearly 47% of home sales in Mississippi and 46% in Montana earlier this year, showing just how much cash purchases can vary by location (see map below).
Curious how your state compares?
According to Realtor.com, states with the highest share of cash buyers tend to have a mix of affordability, wealth, and buyer demographics. This often includes areas with lower home prices or more retirees and second-home buyers.
Depending on where you live, you could see more or fewer cash buyers than the national average. A local real estate agent can help you understand who’s buying homes in your area and what that means for your market.
Most Buyers Are Still Using a Mortgage
And if all this talk about cash buyers makes it seem like everyone is paying cash, that’s not the case. If you’re planning to buy a home with a mortgage, you’re actually part of the majority.
According to NAR, nearly 3 out of 4 home purchases still involve a mortgage. And for homes priced between $200,000 and $750,000, only about 1 in 5 are purchased with cash, according to Realtor.com (see graph below).
That means most buyers in that price range are using a mortgage, too. So don’t assume you’re at a disadvantage just because you need financing to buy your home.
Cash Buyers and Your Move
So, what does all of this mean for you? It could make a bigger difference than you realize.
If you already own a home, you may have more equity than you think, which could help make your next move more affordable. And if you’re planning to buy with a mortgage, you’re not alone. Most buyers are doing the same thing.
The bottom line? Don't assume your options are limited just because of how others are buying homes. What matters most is how much equity you have, what fits your budget, and what’s happening in your local market.
Bottom Line
Cash buyers play a big role in today’s housing market, but they’re certainly not the only ones buying homes.
Whether you’re looking to use your home equity or planning to buy with a mortgage, let’s take a closer look at your equity and what’s happening in your local market so you can better understand your options and plan your next move.
