High Mortgage Rates Boost Cash Buys, and Co-Op and Condo Buyers Pay Less

With hoped-for cuts in interests rates on hold due to the stubbornness of inflation, buyers of co-op and condo apartments are bypassing banks and plunking down cash in near record numbers.

In the first quarter of this year, 63.4% of Manhattan sales were all cash, the third-highest share in a decade, according to the appraisal firm Miller Samuel, yahoo!finance reports. Predictably, the share of mortgage transactions was the lowest on record.

While the trend is particularly pronounced at the high end of the market in Manhattan, it's much broader than that, with all-cash transactions on the rise across all price points nationwide. The share of all-cash purchases in the US in the first quarter of the year was a monthly average of 31%, according to data from the National Association of Realtors. That matches the highest monthly average for any full year since 2013 — when a crop of distressed properties became available as the Great Recession bottomed out.

"Cash isn't exclusive to the wealthy, but the probability increases as you move higher in price," says Jonathan Miller, president and chief executive at Miller Samuel. Why? "Because of equity withdrawals from the booming stock market and other assets that they can leverage to make the purchase."

In the first quarter, the Standard & Poor's 500 did boom, jumping just over 10%. The Dow Jones Industrial Average, meanwhile, broke the 14,000 barrier last month for the first time since 2007, the eve of the Great Recession.

There are advantages to buying now with cash. Miller expects real estate prices to continue to go up, especially if mortgage rates moderate, so buyers who act now are getting better deals than those who wait.

Buyers with cash may also get a better deal on price. A recent study from the University of California San Diego Rady School of Management found that all-cash buyers pay 10% less on average than mortgage buyers.