As the adage goes, “Cash is king.” And this couldn’t apply more to the first quarter of 2023. A record number of buyers are avoiding mortgages, and sellers eager to close are jumping at their all-cash offers.About 57% of first-quarter Manhattan purchases were in cash, the most significant share since Elliman began tracking payment methods in 2014. That compares with 39% in early 2021 when mortgage rates were near record lows. The transactions show it’s not just the ultra-wealthy investors who are dropping cash for Manhattan homes. No surprise here, as borrowing costs hover at roughly double their 2021 levels. Unburdened by interest costs, cash buyers have some advantages. An edge in bidding wars, more leverage at the negotiating table, especially with sellers eager to act fast. And most importantly, closings won’t be delayed or stalled if a lender’s appraisal falls short of the contract price or any other bank delays. When equities markets are strong, and interest rates are low, buyers tend to deploy their cash in the stock market. But at times like these, when the stock market is volatile, and the economy is unpredictable, many buyers see value in the stability of a real estate asset, and the utility of a home may seem like a better allocation of those funds. It will be interesting to see how this trend develops in Quarter 2 of 2023. One thing remains certain, all cash or financing, it’s a good time to make a deal.
