As home prices rise, all-cash sales are happening less. According to the National Association of Home Builders’ Eye On Housing blog, all-cash purchases accounted for just 6.9% of new home sales in Q2 2024, marking the lowest level recorded since Q4 2021. When looking at home sales where mortgages were used, FHA-backed and VA-backed sales also fell during Q2 2024, while sales using a conventional mortgage stayed the same.
Since the Federal Reserve began raising interest rates in early 2022, the share of all-cash new home sales has increased significantly, with an average of 8.6% amid this tightening cycle. The interest rate hikes have caused the average mortgage rate to more than double, surging from 3.1% in the fourth quarter of 2021 to 7.0% by the end of second quarter 2024.
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