Study: West Palm Beach No. 2 for homes bought with cash
The number of cash-bought homes might be declining in some areas of the country, but new figures show it is still occurring at high levels in Florida.
A recent report from real estate firm Redfin found that all-cash purchases were most prevalent in Long Island, with 66.5% of home purchases made in cash in July.
However, West Palm Beach was a close second at 56.4%, Jacksonville was third with 45.5%, Fort Lauderdale ranked fifth at 43.3% and Orlando was sixth in the country for cash-bought homes at 42.5%.
Holly Meyer Lucas, the owner of Meyer Lucas Real Estate, offered her thoughts on the study.
"That number is a little bit misleading," Meyer Lucas said. "A lot of the cash buyers are people who are high networth individuals who've leveraged their portfolio of assets, so they have taken a line of credit."
"Three of the five metro areas with the highest share of all-cash purchases are in Florida, partly because the state is home to a lot of affluent buyers," the report said.
An all-cash purchase is defined as one in which there is no mortgage loan information on the deed.
About one-third, 31.4%, of U.S. home purchases were paid for with all cash in July, which is up from 27.5% a year ago and significantly higher than pre-pandemic levels, the Redfin study said.
This trend that spiked during the pandemic has made it difficult for first-time homebuyers looking to purchase a house since out-of-state residents moving to Florida have quickly scooped up properties once they hit the market.
Another factor hurting new homebuyers and residents of moderate incomes is the recent increase in interest rates as the Federal Reserve works to abate inflation.
Florida saw a surge in residents from other parts of the country looking to move to the Sunshine State because of the more relaxed COVID-19 policies, prompting a surge in the demand for homes.
Data from the Mortgage Bankers Association shows that the average interest rate on one of the most popular home loans in the United States is now above 6% for the first time since 2008.
Buyers who don't use loans are able to avoid high-interest payments as the housing market remains hot in Florida while it subsides somewhat in other parts of the country.
Also contributing to Florida's housing crisis has been the surge in real estate investors buying properties.
The Redfin study said that real estate investors bought up a record share of the U.S. housing stock in the fourth quarter of last year. About three-quarters of investor home purchases are made with cash, the study said.
"We probably had four houses that we really fell in love with that we lost because we didn't do cash offers," Garrett Severen said.
He and his wife said they started trying to buy a home in February.
"Nobody wants to deal with the home sale contingency or a loan contingency," Marisa Severen said. "They just want cash easy, close, boom boom you're done."
Meyer Lucas said local residents looking for a home are being hurt by the area's inventory shortage and inability to compete with cash from northeast and California buyers.
"If you are local and you need to get a mortgage — because normal people need to get mortgages to get homes — it is almost impossible to compete against these cash buyers," Meyer Lucas said.
But she offered hope and said that there might be an opportunity in the near future.
"I think that locally we will see a big pop of inventory of people who bought homes here very quickly with their cash, to get in the state of Florida, who now are going to sell those homes to be in the home they actually want to be in," Meyer Lucas said.
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