Cash is king: High mortgage rates are changing home-buying trends

2024 has been a challenging year for prospective home buyers. Limited housing inventory, historically high interest rates, and inflated home prices have created barriers for those hoping to buy an affordable home this year.

Though 30-year fixed-rate mortgages have hovered between 6% and 7% over the past 12 months, experts anticipate that rates will continue to drop. The CME FedWatch tool predicts that the Federal Reserve Board will cut interest rates twice by the end of 2024 .

Though a September cut is widely expected at the Sept. 17-18 meeting of the Fed's rate-making body, the Federal Open Market Committee, an additional rate cut could improve consumer confidence in the housing market.

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The lack of affordability has prompted consumers — especially young buyers— to explore co-buying homes. 26% of buyers purchased a house with a friend or family member , and 44% of all buyers cited affordability as the main driver for co-buying.

TheStreet spoke with Ryan Serhant , Real Estate Broker, TV personality, and CEO of SERHANT , about the 2024 housing market and how consumers are adapting to new challenges.

2024 housing market trends

The heightened demand for housing has created an extremely competitive market where cash offers are becoming the most effective way to purchase a home.

“Cash is king,” Serhant said. “Pre-Covid in New York City, you'd have 30% to 35% of buyers paying in all cash, regardless of whether they were doing a technical refi after closing. Today, it's hovering around 70%.”

Although this trend is prevalent in major cities, cash-only offers are increasing nationwide. The National Realtors Association found that as of January 2024, 32% of home sales are all-cash deals .

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Given the strengthened market demand and that 29% of home buyers are single , it’s easy to see the appeal of sharing the cost with someone you trust.

Serhant explains the recent interest in co-buying homes among younger customers.

“If you have a lot of cash, the housing market is going to favor you, albeit unfairly,” he explained. “We're starting to see younger buyers coming into the fold and co-purchasing. If you would talk to me about people co-purchasing ten years ago, even three years ago, I would have said that that's a very hard thing to do. Now it’s becoming more common.”

Co-purchasing homes is helping younger buyers build wealth

Despite a challenging market, Serhant unpacks how co-purchasing a home provides pathways to building wealth for the younger generation.

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“You'll see two young people looking at rents, and they're saying, ‘Okay, rents are going up 3% to 10% a year — let's go and buy something together instead.”

“Home ownership is a pathway to wealth, especially in the United States,” he continued. “It always has been, and that's not going to change. If buyers can get a great deal by pooling their cash together instead of being roommates on a rental, they can be roommates on a house they purchase together.”

​​”There are different legal structures in place that make co-buying palatable to everybody, so we're seeing that more and more. It's picking up a bit in New York City, even condos with strict boards and regulations.”

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