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Comment by potatolicious | Hacker News Reader

Some other key things:

4) Lots of people buying with all-cash or mostly-cash. You're not at all rate-sensitive if you're a cash buyer.

5) A lot of these cash-heavy buyers are powered by generational wealth.

6) The housing shortage in the US is incredibly acute, so much so that the market will continue chugging along even as borrowing conditions worsen considerably. I bought a couple of years ago when the market was red-hot largely because a family-sized property was unrentable - to get anything big enough for my needs there was no choice but to buy. I imagine others are in the same position now.

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Cash buyers are not necessarily interest rate insensitive. When I bought a house earlier this year, my lender advertised a cash offer program. They would by the house with cash on my behalf. Then, they would confirm they could give me the mortgage, and sell the house to me at the same time they give me the mortgage. This program wasn't available in my state, but might be common enough in others to skew the numbers.

Institutional (or rich) buyers have the option of buying the house in cash, then taking out a loan against the house. This gives them the benefit of being able to make an all cash offer, and the long term benefit of leveraged, low interest debt.

Yea, in my home we have extremely high prices for homes and the only thing my family can do is rent a house owned by family. We can't find a house to rent on the real market (this house is semi-broken-down and normally wouldn't be rented to anyone), and we certainly can't afford to buy, so I guess we'll live here until we inherit a home from family or maybe get kicked out by my wife's cousin once he inherits this one!

I don't think you should ever buy home all-cash. That would be financially stupid move. Even at 6% rates, you can get far better return on your capital on long term basis (>15 yrs). Additionally, you can always refinance later whenever rates goes down. So, paying all-cash for a house is losing a lot of ROI on your capital and is plain stupid.

There is a lot of diligence and headaches when you are involving the bank's money. Sellers like cash offers and it's at least a tiebreaker factor when you have two equal offers, in fact many sellers will prefer an all-cash offer even if it's a bit less in the end (small buyers are gonna wanna quibble about another couple grand for property defects too).

Yes, it's perfectly sensible to use the bank's money when it's a fairly sure bet and the interest rate is low... but there is a big complexity cliff that exists between "used 0.1% of the bank's money" and "used 0% of the bank's money". Using 0% of the bank's money is preferable when closing the deal at least.

If you are in a position to make an all-cash offer but you want financing, you could probably buy the property in cash and then get a mortgage after. That's not the usual workflow for homebuyers but I don't see why you couldn't do it, it's just like refinancing really.

You don't even need to do that, just make an all cash offer and set the closing date like 30-45 days out and you can finance it from the get go. You just need that extra closing time to get the financing ironed out and then you can still pay for a home with a mortgage even if you made an all cash offer. That is what I did with a place back in March.

You're assuming that the all-cash (or mostly-cash) buying is buying with their own cash.

I don't know about you but in my generational cohort the people buying entirely on their own earning power is a small minority. The bulk of buyers are only able to enter the market due to generational wealth - and that comes in the form of cash.

So yeah, agreed in principle that if you had $X in cash lying around it'd be a poor choice to put it all on a piece of real estate. But in this case the $X in cash doesn't belong to you.

The whole state of the housing market is beyond alarming - not only are things completely unaffordable to wage earners, the people who are able to survive in this market are overwhelmingly doing so via familial and generational wealth. This is a flywheel of wealth inequality that is accelerating by the day - the well-asseted use their wealth to catapult their offspring into more assets that largely wage-earning classes (even very well-paid wage earners) are completely cut out of.

Lots of people buy with cash to win bidding wars. Sometimes they also just hate the idea of a mortgage hanging over their heads.

I've also known people who have enough familial wealth that they just don't care.

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