In one of the most expensive housing markets in the country, nearly one in four homes is selling for all cash.
Between January and April, 23.8% of home sales in the Seattle area went to buyers paying all cash, according to an analysis of county property records by Redfin. The level of cash purchases is up slightly from about 22% in the same period last year and roughly 20% in 2019.
Nationally, the share of all-cash home buys — 30% — hit a level last seen in 2014, when cash deals were soaring in the years following the housing crash, according to Redfin.
In many of those markets, of course, it takes a lot less cash.
Local brokers say the tech industry, boasting employees with high salaries and stock-option packages, is a driving force of cash purchases here. Cash shoppers looking for their own home or second homes are drawn to some of the area’s priciest neighborhoods, while investors may pay all cash to acquire midpriced rental properties that can turn a profit, agents said.
“A lot of people are coming from markets like the Bay Area, where prices are higher. They’re coming in here with no sticker shock,” said Nick Glant, a founding broker at Compass Seattle. Glant said his most recent all-cash deals were in the range of $2.5 million to $4 million.
“While we view the market as ‘it’s gone crazy in price,’ a lot of people coming from the Bay Area view us as still a pretty good buy,” Glant said.
Fewer homes are going to all-cash buyers than during Seattle’s 2017 housing frenzy, according to Redfin’s data, but the recent uptick reflects the heated market during the coronavirus pandemic.
A slim supply of homes for sale, combined with high demand from buyers looking to move, has stoked local housing prices and left buyers fighting bidding wars.
Cash fuels the local market not only in the form of all-cash purchases but also among buyers still relying on a mortgage but trying to get an edge on other shoppers. Home buyers face pressures to waive financing protections and put forward as much cash as they can in their down payment and as part of a deposit known as earnest money.
The upward trends can mask the city’s unequal economic outlook: Seattle-area home prices are climbing at the third-fastest rate in the nation even as the number of people experiencing homelessness in King County stands at the third highest in the U.S. By one recent estimate, a minimum-wage worker would need to work 90 hours a week to afford a one-bedroom apartment in the Seattle area.
In the Seattle area, Hunts Point, Medina and Yarrow Point had some of the highest shares of all-cash sales in 2020, according to separate data from the Northwest Multiple Listing Service. (The sample size is small: Between 11 and 63 homes were sold in each area.)
In Seattle itself, 12% of homes sold for all cash, with some of the highest rates in Washington Park and Broadmoor, according to the NWMLS.
Redfin defined all-cash sales as those in which no mortgage information was included on the home deed filed in county property sale records, with certain filters to avoid counting transfers of ownership that are not typical sales. The data includes single- and multifamily properties. Redfin included King and Snohomish counties in its measure of the Seattle metro area.
Even buyers who aren’t able to pay the full price of their home in cash may add more cash to their down payment or earnest money to make their offer more attractive to a seller.
Buyers face pressure to waive their financing contingency, meaning they could lose their earnest money if their loan falls through. That amounts to taking on more risk to try to capture the eye of a seller who may be considering multiple offers.
“They’ve had to get very creative with their financing,” said Jim Dierst, who manages two John L. Scott offices in Seattle.
That only tightens competition for buyers with less in the bank.
The Seattle area has seen a 5% dip in the number of buyers using loans backed by the United States Department of Veterans Affairs (which do not require a down payment), said Chris Birk, vice president of mortgage insight at the lender Veterans United.
Birk attributed the drop to the competitive market and sellers’ misconceptions about VA loans.
“The market we’re in of historically low inventory only heightens and exacerbates some of those challenges,” Birk said. With the lean number of homes for sale, “you’re seeing veterans just give up on the home search or pause the search,” he said.
Even as all-cash buys ticked up in Seattle, according to Redfin’s data, foreign investors who may have bought with cash were hampered by travel restrictions during the pandemic, Dierst said.
Dierst said the share of all-cash offers he has seen per month dipped from about 20% pre-COVID to between 12 and 15% now, in part because of a drop-off in investors.
Seattle, where home prices have been soaring for years, is nowhere near the top of the list for cities with the highest share of cash buyers, according to Redfin. More than half of home purchases in West Palm Beach and Naples, Florida, were all cash.
Almost a third of homes sold for all cash in Phoenix, where prices are climbing fastest in the nation but the median home costs about half as much as in Seattle.
Cash can offer home sellers peace of mind for a fast closing process. But even cash buyers face a sellers’ market.
“There’s a perception that cash is always going to win. In our market, that’s not always true,” said Charles Mortimer, a Redfin agent based in North Seattle who estimates about one in five of his clients pay in all cash. Some sellers prioritize the highest offer, however it’s paid, he said. “Different sellers will have varying degrees of tolerance.”