Economists at the Goldman Sachs Group reported than more than 50% of all homes sold last year and throughout this year were bought mortgage-free and that all-cash sales have more than doubled since 2006. Before the housing bubble burst, only 20% of homebuyers made cash-only transactions.
Goldman Sachs analysts determined the percentage of cash-only home purchases using data from the National Association of REALTORS, the U.S. Census Bureau, Mortgage Bankers Association and Lender Processing Services. Just before the housing crisis, 67 cents of every dollar were financed with a mortgage. Today, that is down to 44 cents.
Many of the cash buyers are investors, foreign buyers and wealthy homeowners who want to buy a new house without having to undergo the stress and headaches associated with the mortgage application process. These cash buyers can bypass the stringent lending requirements by purchasing a home outright. The sellers are very happy because they don’t have to deal with obstacles on the way to closing.
As a result of these mortgage-free purchases, first-time homebuyers will now have to compete with those who have the cash on hand and face rising home prices. This competition in the housing market, in turn, has driven up home sales prices exponentially.