Elevated home prices are keeping all-cash sales low, with all-cash sales making up just 7.9% of total home purchases in the third quarter of 2024. While this was the highest rate for any quarter this year, it was also the lowest rate for a third quarter since 2022, according to the National Association of Home Builders' Eye On Housing blog.
However, this lack of all-cash sales hasn't always been the case. When the Federal Reserve began raising interest rates in early 2022, the share of all-cash sales increased, averaging 8.7% throughout this period. This is because rate hikes at this time more than doubled the average mortgage rate, rising from 3.1% in late 2021 to 7.0% by mid-2024. However, after reaching a peak of 10.7% in late 2022, the share of all-cash purchases has recently started to decrease.
Although cash sales make up a relatively small portion of new home sales, they constitute a larger share of existing home sales. This share also increased significantly since the Fed began raising interest rates in early 2022. According to estimates from the National Association of Realtors, 30% of existing home transactions were all-cash sales in September 2024, up from 26% in August and 29% a year ago.