Dec 4, 2023 - Real Estate

More people are paying all-cash for luxury homes around D.C.

A series of rowhouses in Washington, D.C.'s Georgetown neighborhood.

Photo: Caroline Brehman/CQ-Roll Call, Inc/Getty Images

More DMV luxury homebuyers are paying all-cash for their houses to circumvent high mortgage rates.

Why it matters: It's already difficult to get into the D.C. market, which is one of the nation's most expensive. But going against all-cash offers can make it even harder.

What's happening: As 30-year fixed mortgage rates continue to remain well above 7%, the issue of the D.C. area's already limited housing supply is heightened as those locked into low pandemic-era rates stay put — meaning current buyers are now seeing even fewer options and more competition.

What they're saying: Most of these all-cash offers are from repeat buyers who've seen healthy appreciation in their homes over the last few years, Bright MLS chief economist Lisa Sturtevant tells Axios, and they're rolling that over into the purchase of a new house. And many are just simply well-off — after all, the DMV is home to some of the wealthiest counties in the U.S..

  • "When people can pay cash to avoid higher mortgage rates, they're going to do it," says Sturtevant.
  • If they want, buyers can then take out a mortgage once rates go down.

Plus: All cash is something of a dangling carrot used to make an offer more competitive in highly sought-after neighborhoods in the D.C. area, says real estate agent Robert Hryniewicki of HRL Partners at Washington Fine Properties.

By the numbers: 21% of this year's DMV luxury sales through October were paid for in cash, compared to only 17% through the same time period in 2022, according to data provided by Bright MLS — this year's share so far is the highest rate since Bright MLS began recording this data. (Bright defines a "luxury home" as priced in the top 20% of the market.)

  • Meanwhile, 41% of Hryniewicki's anticipated 2023 team sales have been all-cash — higher than last year's 28%.
  • Maryland's Montgomery and Frederick counties saw the country's largest increase in the number of all-cash offers between 2017 and 2022, the Washington Post reported earlier this year.

Meanwhile, other people with preexisting home equity or first-timers with financial assistance from relatives are offering larger down payments, meaning they can buy down their mortgage rates and take out a smaller loan.

Yes, but: All-cash offers and larger down payments can make what's already an inaccessible market for many even more beyond reach.

  • "The people who were lucky are going to be luckier still," says Sturtevant of those who bought during the Covid boom. "The people who are having a hard time getting in [to the market] are only going to find it even more challenging."

This can especially affect people of color in the region, which has large racial disparities when it comes to homeownership and income.

  • Last year, a Brookings Institution study found that Black people have the lowest homeownership rates in the DMV and that Black and Latino people have the lowest median incomes in the region.

What we're watching: Sturtevant expects rates will only fall to around 6.2% by the end of 2024 — meaning buyers who can will continue to look for ways to work around them.

  • "Cash is still going to be king," she says.

Editor's note: This story has been corrected to reflect that Bright MLS' data runs October 2022 to October 2023 (not year to date) and that the comparison is with the same period last year.

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