The real estate market has been on fire for months. Historically low mortgage interest rates have driven some of the demand. Additionally, as more and more people worked from home, some discovered that they could relocate to places they believe cost less to live and had better qualities of life. It has become clear that some companies will never make people return to their offices. Additionally, the COVID-19 pandemic did not hit the incomes of middle-class and upper-class Americans very hard, for the most part.
Demand also has tightened supply in some cities. Homes may only remain on the market for a few days. In some cases, buyers get more than one bid on their homes. In fact, the ability to close immediately has become critical. That means all-cash offers have become more attractive.
The number of all-cash purchases is at its highest level since 2014, according to a study by Redfin. The real estate research firm looked at home sales for the first four months of this year based on county records. The figure has risen to 30.0% for that period from 25.3% in 2020. A real estate agent in one popular housing market described the trend. Shauna Pendleton, a Redfin agent in Idaho, said, “I’ve never seen more cash in Boise’s housing market than I’ve seen in the past year. I just sold a $700,000 home to a cash buyer last week. The entire $700,000 came from his E*Trade account.”
The cities where the highest percentage of buyers pay all cash are largely along Florida’s Atlantic and Gulf coasts. The top figure is for West Palm Beach, one of American’s richer resort areas. The percentage of all-cash buyers for the first four months of 2021 was 52.6%. It topped 85 other metros Redfin reviewed. Other Florida cities with heavy cash buying included Naples (52.5%), North Port (49.4%), Port St. Lucie (46.2%), Palm Bay (44.1%), Cape Coral (44.1%) and Jacksonville (40.1%).
Dina Blau, a Redfin real estate agent in the West Palm Beach area, made the point that: “Florida is a big second-home market, and second-home buyers often pay with cash. During the pandemic, folks also flocked to Florida to buy primary homes. They sold their houses in New York, New Jersey, Chicago or California and used the proceeds to pay cash for properties in Florida.”
Will the trend continue? Like most other large transactions right now, whether they are for cars, boats or houses, the economy will continue to be the driver. If gross domestic product continues to rise at 5% a quarter, unemployment continues to fall and the COVID-19 pandemic horror continues to improve, cash sales should stay near their historic high levels.
Click here to see which county has the most expensive homes in America.
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