The share of new single-family constructions bought with cash grew to 9.2% of sales in the third-quarter, rising from 7.1% three months earlier, a new report from the National Association of Home Builders said. The jump of more than two percentage points is tied for the largest quarterly increase since 2010.

The growth of all-cash purchases came at the expense of federally backed financing. New properties funded with Federal Housing Administration-backed loans shrank to 13.2% of total volume from 13.6% the previous quarter, while the share of homes guaranteed by the Department of Veterans Affairs fell by almost half to 3.4% from 6%. Conventional mortgages were used in 74.7% of quarterly sales, up from 73.4% in the second quarter.

Since 2017, the share of cash transactions in the new-construction market has correlated closely with movements in the federal funds rate, the NAHB said. The rate currently stands at 5.5%, up 525 basis points since March 2022.

NAHB's findings, which are based on analysis of U.S. Census sales data, also appears to show the all-cash rate of growth in the new-home segment running hotter than the overall market pace. 

Last week, a report from real estate data provider Attom showed cash transactions also increasing for all single-family properties and condo units in the third quarter, but by only 0.2%. Still, more than 36% of total sales during the period came from cash deals, and conditions are in place for that share to become larger, Attom said.  

"If rates keep rising, that should continue creating favorable conditions for more all-cash deals," said Attom CEO Rob Barber, in a press release. 

While not immune from challenges in the current housing slowdown, homebuilders have seen business come in stronger this year compared to nonbank lenders, as aspiring buyers looked at newly built constructions in response to a shortage of existing inventory. The number of homes for sale last month was at its smallest for any September total since 1999, the National Association of Realtors recently reported.  

Scarce existing inventory has also led real estate businesses to look for new strategies and partnerships as they search for customers, with technology-backed brokerage Offerpad announcing its collaboration with Anywhere Real Estate this week. The partnership will open up Offerpad's platform to requests from sellers outside of its coverage area, who will be served by Anywhere affiliated agents. Anywhere is the nation's leading real estate franchiser, whose brands include Century 21 and Coldwell Banker. Offerpad also offers all-cash deals as one of its options to sellers.