Most people who are buying a house need a mortgage. But interest rates are high, and it looks like they’re going to remain high for a while. That’s put a damper on the real estate market, as people try to wait for cheaper money to help them compensate for prices that shot skyward during the early years of the covid-19 pandemic. If you’re so rich you don’t need a mortgage, though, the world is your oyster.
The real estate firm Redfin reports that a record share of wealthy buyers are throwing down cash to buy luxury homes. According to a report published by the company Wednesday (Jan. 31), nearly 47% of all high-end US homes were bought without a mortgage in the last quarter of 2023. That portion is 40% larger than it was this time last year.
The cash-purchase segment of the housing market has been creeping up for years, but it’s not like the number of cash buyers is jumping. The bigger trend is mortgage-needers shrinking from the market across the board.
“Were it not for these cash buyers, I think the housing market would be in even worse position than is now,” Daryl Fairweather, Redfin’s chief economist, told the Associated Press in November.
Even so-called “jumbo” mortgages, so big the government won’t buy them from private credit markets like most home loans, are getting harder to come by—the Fed says that 1 in 4 banks are tightening lending standards for them.