Almost a third (30%) of US home purchases this year have been paid for in cash, according to an analysis by Redfin (www.redfin.com), technology-based real estate brokerage. This is an increase from 25.3% for the whole of 2020 and represents the largest share since 2014, when 30.6% of homes were purchased with cash. Redfin analyzed county records published from January 2021 to April 2021.
Cash purchases are on the rise as Americans reap the rewards of a strong stock market. The S&P 500 Index has gained 36% in the past 12 months alone, as of July 14, 2021.
“I’ve never seen more money in the Boise housing market than I saw last year,” said Shauna Pendleton, Redfin real estate agent in Idaho. “I just sold a home for $ 700,000 to a cash buyer last week. All of the $ 700,000 was from his E * Trade account.”
Additionally, remote working has allowed homeowners in expensive cities, including San Francisco and New York, to sell their homes and move to cheaper areas, where they can often afford to buy properties in cash.
“Well-to-do homeowners in Seattle, Portland, and parts of California are selling their homes for $ 1 million or $ 2 million,” Pendleton said. “Then they come to Boise, where they buy houses twice the size for half the price.”
Investors, who often pay in cash, are returning to the housing market after pressing a pause at the start of the pandemic. Home purchases in the United States by investors rose 2.7% year-over-year in the first quarter, marking the first period of growth since the start of the coronavirus pandemic.
The increase in all-cash home purchases is causing challenges for many first-time and low-income homebuyers, who are struggling to compete with cash offers. While the competition eases slightly, around two-thirds of housing listings written by Redfin agents still face bidding wars.
In parts of Florida, more than half of the homes sold this year were bought for cash
In the West Palm Beach, FL, metropolitan area, 52.6% of home purchases this year were paid for in cash. This is the largest share of the 86 metropolitan areas in Redfin’s analysis. Subways must have recorded at least 3,000 home sales between January 1, 2021 and April 30, 2021 to be included in this report. West Palm Beach was followed by Naples, FL (52.5%), Nassau County, NY (50.2%), North Port, FL (49.4%), Port St. Lucie, FL (46.2%) , Greenville, SC (45.4%), Palm Bay, Florida (44.1%), Cape Coral, Florida (44.1%), Des Moines, IA (41%) and Jacksonville, Florida (40.1% ).
“Florida is a big second home market and second home buyers often pay cash,” said Dina Blau, Redfin real estate agent in the West Palm Beach area. “During the pandemic, people also flocked to Florida to buy primary homes. They sold their homes in New York, New Jersey, Chicago or California and used the proceeds to pay cash for properties in Florida.”
California has the lowest share of cash transactions
Expensive California subways, where it’s more difficult to pay in cash because house prices are relatively high, were low on the list. In San Jose, Calif., And Oakland, Calif., 12.5% of home purchases reported this year were made in cash, the lowest share of subways analyzed by Redfin. Next come Richmond, VA (16%), Los Angeles (16%), San Diego (16.2%), Lake County, IL (17.2%), Sacramento (17.7%), San Francisco (17, 8%), Oxnard, CA (18%) and Bakersfield, California (19.3%).
Still, buyers in California are not out of the woods, according to Steven Moore, a Redfin real estate agent in Los Angeles.
“I recently made an offer for $ 1.8 million for a house listed at $ 1.7 million,” Moore said. “The top 10 deals, out of 40 in total, all cost around $ 2 million and were all in cash.”