For Immediate Release: May 14, 2020
Contact: Katie Groenke, firstname.lastname@example.org
Nearly Half of All NYC Homes are bought with Cash: New Report from Center for NYC Neighborhoods
Analysis Shows the Outsize Power of Cash Buyers in NYC Over Mortgage-Dependent Buyers
New York, NY — The Center for NYC Neighborhoods, a nonprofit that promotes and protects affordable homeownership in New York for middle and working-class families, released a new report today revealing that cash buyers are now overwhelmingly outcompeting mortgage-dependent home seekers in New York City. Because COVID-19 has an outsized impact on lower-income black and Latinx families, it will intensify the disadvantage these families have in the face of cash purchasers who use their resources to pick up single-family homes, co-ops, and condos across the five boroughs.
The report – The Outsized Power of Cash Buyers in New York City’s Housing Market – has three main findings:
- Cash sales make up around 40% of NYC’s home-purchase market.
- Among buyers, those with cash often pay less than buyers with mortgages.
- Cash sales are especially concentrated at the bottom of the market: 52% of lower-priced homes were purchased all-cash in 2019.
As home prices increase, the all-cash discount has grown larger, which often results in cash buyers outcompeting buyers with mortgage financing through their ability to buy properties quickly, without waiting on loan approval. New York City already has the lowest homeownership rate of any major city in the U.S and a spiraling housing affordability crisis. Diminished opportunities to purchase affordably-priced homes means that working- and middle-class families, particularly the city’s black and Latinx households, disproportionately remain renters, while higher-income and disproportionately white buyers benefit from accumulating real estate assets. This status quo makes families of color most vulnerable to market-driven displacement.
While temporary eviction and foreclosure moratoria are in place, massive unemployment is sure to produce a wave of foreclosures in the near future. The Center’s analysis reveals that cash buyers are best positioned to take advantage of falling prices and distressed sales, pushing homeownership out of reach for even more working families.
“Now that we understand the degree to which cash dominates the NYC homeownership market from the most expensive condos to modest homes in Queens, it is critical that we make changes so that our working- and middle-income families are not left behind,” said Christie Peale, CEO & Executive Director at Center for NYC Neighborhoods. “With the COVID-19 crisis, millions of New Yorkers are struggling and relying heavily on their savings, which will further disadvantage many qualified homebuyers who have been saving their whole lives for a down payment to become a homeowner. We hope that the findings in this report will encourage policymakers to adopt changes that will give families a chance to own in the communities they love.”
The report recommends two policy options to bring equity to the system:
Reform the Mortgage Recording Tax (MRT). The MRT is a regressive tax on homebuyers unable to buy with cash, adding a massive expense that wealthier buyers can avoid or minimize. The Center proposes eliminating the MRT only for condos and small homes, which would reduce the disadvantage faced by homebuyers requiring mortgages under the current system without affecting the MRT revenue generated from mortgages on multi-family buildings and nonresidential buildings.
Expand down payment assistance for homebuyers. A lack of savings to cover the down payment for a home is frequently cited as the biggest barrier to homeownership throughout the US, and especially in New York City. The Center recommends that City and State resources should be expanded to give LMI buyers at least $100,000 in assistance. Furthermore, increasing eligibility to families earning up to $115,000 for a family of three (120% of AMI) would expand affordability to families that may be ready for homeownership but lack sufficient savings for the upfront costs of buying a home.
For more information and to read the full report, visit cnycn.org.