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By: Ilana Siyance
There’s a new standard in purchasing a home in Manhattan— and it entails paying in all-cash. As reported by the NY Post, because of the higher mortgage rates, more and more home buyers are paying up front for their Manhattan homes. In April, 64% of the homes purchased in Manhattan were all-cash transactions, per a new analysis by the NY Times of more than 100,000 NYC real estate deals. That’s close to double the number in other large US metro areas (39%), although there has also been a strong jump in cash deals throughout the country. There has been a huge spike in cash deals compared to just two years ago, in 2022, when interest prices started to rise. The Times analysis used data from Marketproof and ATTOM.
The all-cash trend is quickly becoming the expected norm for doing deals, whereas in the past it was expected to get a mortgage. Since 2022, when the federal reserve raised interest rates, buyers have been holding back from taking out a new mortgage at the higher rates. The cost of owning a home went up substantially when borrowing at the higher interest rates. This created an opportunity for those with savings, to step in and make a home purchase without borrowing money from a bank. Housing inventory has remained low, so that buyers also use the all-cash incentive to seal the deal on a property, where demand remains high by promising an immediate cash payment. “You have a lot of power when you’re all cash,” Brown Harris Stevens chief executive Bess Freedman told the Times. “People are wielding that now.”
A lot of the usual home buyers seem to be priced out, due to the interest rates hovering around 7 percent. The all-cash trend is not only for super posh luxury homes, but for transactions across the price spectrum. In fact, the largest leap in cash purchases between 2021 and 2023 was for apartments priced below $3 million, per the Times. In February, the cheapest home for a cash closing in Manhattan was for a $250,000 studio, while the most expensive was for a four-bedroom duplex that cost over $10 million.
While cash has become the standard at every price point, it is especially expected among the most expensive luxury homes. In 2023, for Manhattan home sales priced $10 million or more, a whopping 80 percent of all the deals were all-cash. Per the Post, during the same time frame, 66 percent of transactions with home prices between $3 million to $10 million were all-cash. The percentage went down gradually from there, with 62 percent of home sales between $2 to $3 million being all-cash deals.
Of Manhattan homes sold between $1 million to $2 million, some 57 percent were all-cash deals. About 54% of home sales in the borough with a price tag of $1 million or less, were all cash. The median sales price in Manhattan was $1.1 million in April, as per StreetEasy.
