IVR - All-cash home purchases hit 2014 high as more buyers avoid pricey mortgage loans

The share of U.S. homes purchased with all cash for October reached the highest level since 2014, Redfin reported Wednesday, as the surge in mortgage rates caused more homebuyers to avoid expensive monthly interest payments.

Specifically, 31.9% of home purchases were paid for with all cash during the month, up from 29.9% a year before and from a record low of 20.1% in April 2020, when mortgage rates were near historical lows.

Mortgage rates have declined in recent weeks but are still hovering above 6%,” said Redfin Economics Research Lead Chen Zhao. “During the pandemic housing boom, buyers were incentivized to pay in cash because of low rates, which drove up competition and made all-cash offers an effective bargaining chip for those who could afford them.”

All-cash purchases were the most widespread in Florida, and they occurred the least in the the San Francisco Bay Area, according to the report.

Elsewhere, as housing-market competition comes to a standstill, FHA loans, which typically allow for lower down payments, have gained popularity. In fact, 14.6% of mortgaged home sales used an FHA loan, the highest share in almost two years, Redfin noted.

FHA buyers are "back in the market after bowing out for the last two years, hoping to secure a relatively low-priced home with no competing offers and a high likelihood that the seller will accept their loan type,” said Cleveland Redfin agent Jerry Quade.

Mortgage REITs: Annaly Capital Management ( NYSE: NLY ), AGNC Investment ( NASDAQ: AGNC ), Chimera Investment ( NYSE: CIM ), Two Harbors Investment ( NYSE: TWO ), ARMOUR Residential REIT ( NYSE: ARR ), Orchid Island Capital ( NYSE: ORC ), New York Mortgage Trust ( NASDAQ: NYMT ), Western Asset Mortgage Capital ( NYSE: WMC ) and Invesco Mortgage Capital ( NYSE: IVR ).

Earlier, mortgage applications gained 0.9% as rates reach lowest level since September .

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