Why Are So Many Houses Bought with Cash?

[Brian J Allen]

You hear these numbers about cash home purchases. This one jumped out to me. In April of 2024, 64% of homes sold in Manhattan were paid for entirely in cash.

We know that cash is king, but that is a big kingdom.

Where does all the money come from?

Yes, there are a lot of people who spend less than they make and have a surplus.

There are others who are inheriting wealth from others

But there is another subset that we often forget: those who have equity in their homes.

Much of the equity has built up due to a runup in home values since 2020, which allows these people to use a HELOC to purchase a home for cash.

When rates were low there was a group of people who were using Hard money to purchase and rehab buildings and then refinancing at the end this was the BRRR strategy.

Hard Money is not an option these days since the cost of refinancing at the end of the project is too expensive.

So when we see people paying cash, it is often pent-up savings and HELOC money that people use, and not as often Hard Money.