More buyers are leveraging equity from a previous home sale and dodging higher mortgage rates.

Home buyers who paid cash accounted for 32% of home sales in January, marking the highest rate since 2014, the National Association of REALTORS® reports. Many leveraged the equity from a prior home sale.

Vacation-home buyers and real estate investors made up the bulk of all-cash buyers over the last six months, according to NAR. However, in the last two years, more buyers purchasing a primary residence are using cash as we;;, NAR Deputy Chief Economist Jessica Lautz says on the association’s Economists’ Outlook blog.

"These housing consumers owned a home, sold it and then they could purchase their next property without a mortgage,” Lautz says. "The freedom to make this purchase was likely due to the large amount of housing equity they have earned as home prices have increased in recent years.”

Only 6% of first-time home buyers made a cash purchase in 2023 compared to 26% of repeat buyers, who likely had equity from a prior sale, according to NAR’s data. "As home prices are expected to increase throughout 2024 due to limited housing inventory and high demand to purchase homes, these all-cash buyers are likely to still be prevalent in the market as homeowners earn more housing equity,” Lautz says.

With lean housing inventory in many markets, home buyers still find themselves up against plenty of competition. But cash buyers often have the upper hand. Home sellers may have more confidence in a cash offer. In January, the typical home received 2.7 offers. "If multiple offers continue, these all-cash buyers will likely win bidding wars,” Lautz says. "Those who are financing may not be the winning contract on the home.”

Certain regions of the U.S. appear to have a greater concentration of cash home purchases than others, according to ATTOM Data Solution’s 2023 Year-End Home Sales report, which was released at the end of January. The following 10 metro areas saw cash sales make up at least half or more of all home sales in 2023. Researchers say a higher presence of cash buyers often means more investors, a competitive market for buyers and possibly tighter lending standards, the report notes. The 10 metros with the highest concentration of cash buyers in 2023 were: