Most home buyers across the country finance their purchases with a mortgage. In Detroit, though, the vast majority pay cash, even as home prices in the city are rising.

Low housing prices, affluent buyers, challenges with appraisals and strong interest from investors hoping to make gains on a revived Detroit are making cash deals more common. An eye-popping 87% of all single-family home and condominium buyers in the first half of 2018 paid cash in the city, compared with 28% nationwide, according to Irvine, Calif.-based housing-research...