{"id":154902,"date":"2023-07-05T15:00:29","date_gmt":"2023-07-05T21:00:29","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=154902"},"modified":"2024-02-27T11:48:36","modified_gmt":"2024-02-27T18:48:36","slug":"cash-transactions-now-making-up-a-third-of-sales","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/cash-transactions-now-making-up-a-third-of-sales","title":{"rendered":"Do You Have Cash? You Might Need It For Your Next Deal. Here&#8217;s Why"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC3007396034\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">Buying a home hasn\u2019t been easy for the past few years. Besides increasing interest rates, a decrease in purchasing power, and a housing shortage, cash buyers have also put a squeeze on some would-be buyers.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Nearly a third of U.S. home purchases were made with cash in April, a nine-year high, according to&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/investors.redfin.com\/news-events\/press-releases\/detail\/927\/one-third-of-u-s-homebuyers-are-paying-in-cash-the\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">data from Redfin<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;that looked at the 40 biggest metropolitan areas in the U.S. That\u2019s in line with data from February, which saw cash purchases reach 33.5% and continuing a trend that started during the pandemic.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The share of homes being bought with cash is at levels not seen since 2014, when the housing market rebounded from the Great Recession. But the housing market today looks very different. So what\u2019s driving this drive of cash buyers?<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Rising Interest Rates<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">The main reason cash buyers are making up a bigger portion of real estate is that mortgage rates have increased thanks to rising inflation.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">While rates slid down slightly in June, they remain elevated compared to the same time last year. The 30-year weekly average at the end of June was<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.freddiemac.com\/pmms\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">&nbsp;6.67%,<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;near a 15-year high. That\u2019s made borrowing costs more expensive and sidelined many buyers who need a mortgage.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Buyers have two choices: pay with cash and avoid monthly payments or take out a loan with high interest rates. Buyers who can\u2019t pay in cash have to either drop out of the market or pay the higher rates, Redfin Senior Economist Sheharyar Bokhari explained.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">\u201cThat discrepancy is the reason the all-cash share is near a decade high even though all-cash purchases have dropped: Affluent buyers have the choice to pay cash instead of dropping out of the market,\u201d he said.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The rise in rates has even made home buying slightly less attractive for all-cash buyers, as they can instead invest in assets that are more attractive when interest rates rise, like bonds. In fact, home sales were down 41% from a year earlier, compared to a decline of 35% for all-cash sales.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Lack of Inventory<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Another reason that cash buyers are king in the housing market these days is because of competition. While it\u2019s not as big of a trend, in some metropolitan areas, the lack of available housing means all-cash buyers are pricing out homebuyers who need a mortgage.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And while high rates have pushed out many buyers, it\u2019s also caused a lot of would-be sellers to not sell. In other words, there\u2019s still a supply issue.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">According to data from the<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.nar.realtor\/newsroom\/existing-home-sales-edged-higher-by-0-2-in-may\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">&nbsp;National Association of Realtors<\/span><\/a><span data-preserver-spaces=\"true\">, housing inventory was down 6.1% in May compared to the prior year and remains at roughly half the level it was before the pandemic.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Ways to <\/span>Come Up With Cash<\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">With more demand than houses available and rising interest rates, cash buyers are at an advantage. If you can buy a home outright, you\u2019re not only more likely to win a bidding war, but you, of course, save money in the long run.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But paying for real estate with hard cash isn\u2019t accessible to everyone. Thankfully, there are ways to find cash, namely through a self-directed individual retirement account (SDIRA) or through a Home Equity Line of Credit (HELOC).<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Self-directed IRA<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">While it\u2019s more common to hold financial assets like stocks and bonds in an individual retirement account, it is possible to hold real estate. However, to do so, you need to have a self-directed IRA.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Some people prefer an SDIRA to other types of IRAs because it gives you more freedom to decide what to invest in and helps you save on taxes.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">With a<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/self-directed-ira-real-estate\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">&nbsp;self-directed IRA<\/span><\/a><span data-preserver-spaces=\"true\">, you cannot buy property outright, but the IRA itself does as a separate entity. Because of that, you can only purchase property for investment purposes. You and your family cannot live there or use it as a vacation home. You also have to have a large enough account to cover the whole transaction.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">HELOC<\/span><\/h3>\n\n\n\n<p><span data-preserver-spaces=\"true\">To purchase property using a HELOC, you need to already own a home. With a HELOC, you can get a revolving line of credit that is secured by your home and can be used for large purchases.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">While a HELOC is a different type of loan, it\u2019s about the same as a mortgage. However, because you\u2019ll need to put your home up as collateral, it\u2019s important to make sure that the loan or investment is worth the risk. If not, you could end up losing both properties.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Conclusion<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">While not everyone might have the means to put cash up for a house, that doesn\u2019t mean investing in real estate is completely off the table. With a little bit of research, you can find a way to expand your real estate portfolio in a way that makes sense for you and your finances.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_27436b16b0d905ad7b8c6eedd3543c55\" class=\"visibility-group alignwide  hidden\">\n        \n\n<div id=\"hero-block_cb4912c934bb8ec71ea85f39e28626b0\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-1\/2 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Find the Right Agent, Close the Best Deal<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:18px\">Step #1: Use Agent Finder to match with top <em><strong>investor-friendly<\/strong><\/em> real estate agents to help you find, analyze, and close your next deal.<\/p>\n\n\n\n<div id=button-custom-event-block_e838d66d6348498ea7d91598a5bdbf44 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/agent\/match\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Agent Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/cash-transactions-now-making-up-a-third-of-sales&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Find an Agent<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/2 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/08\/Marketplace-Blog-Blocks-Agent-v3.png\" alt=\"investor friendly real estate agent\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/cash-transactions-now-making-up-a-third-of-sales&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Cash transactions are growing as a percentage of sales. What&#8217;s driving it, and what do you need to do to adjust?<\/p>\n","protected":false},"author":613681,"featured_media":154912,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7119],"tags":[],"class_list":["post-154902","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/154902","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613681"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=154902"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/154902\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/154912"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=154902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=154902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=154902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}