Cash purchases are on the rise as Americans reap the benefits of a strong stock market. The S&P 500 Index has gained 36% in the past 12 months alone.
“I’ve never seen more cash in Boise’s housing market than I’ve seen in the past year,” said a real estate agent in Idaho. “I just sold a $700,000 home to a cash buyer last week. The entire $700,000 came from his E*Trade account.”
Additionally, remote work has allowed homeowners in expensive cities including San Francisco and New York to sell their homes and move to less expensive areas, where they can often afford to buy properties in cash.
Affluent homeowners in Seattle, Portland and parts of California are selling their homes for $1 million or $2 million and coming to Boise where they’re buying houses that are twice the size for half the price.
Investors, who often pay in cash, are wading back into the housing market after pressing pause at the onset of the pandemic. U.S. home purchases by investors rose 2.7% year over year in the first quarter, marking the first period of growth since the coronavirus pandemic began.
The rise in all-cash home purchases is posing challenges for many first-time and lower-income homebuyers, who are having trouble competing with cash offers. While competition is easing slightly, about two-thirds of home offers still face bidding wars.
It can be difficult to compete with an all-cash offer, but prospective buyers should keep in mind that these bids don’t always turn into purchases. Cash buyers are frequently the first to back out because they know they can compete in the market, so they easily get buyer’s remorse if they’re worried they might be overpaying for a house. That’s often good news for financed buyers because it means fewer bids to compete with.
In Parts of Florida, More Than 1/2 of Homes Sold This Year Were Bought With Cash
In West Palm Beach, FL 52.6% of home purchases this year were paid for with all cash. That’s the largest share of the 86 metropolitan areas in this analysis. Metros must have had at least 3,000 home sales from January 2021 through April 2021 to be included in this report.
Naples, FL came in second place, with 52.5% of home purchases so far this year using cash. It was followed by Nassau County, NY (50.2%), North Port, FL (49.4%),Port St. Lucie, FL (46.2%), Greenville, SC (45.4%) Palm Bay, FL (44.1%), Cape Coral, FL (44.1%), Des Moines, IA (41%) and Jacksonville, FL (40.1%).
Florida is a big second-home market, and second-home buyers often pay with cash. During the pandemic, buyers 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.
Expensive California metros, where it’s more challenging to pay with cash because home prices are relatively high, were at the bottom of the list. In both San Jose, CA and Oakland, CA, 12.5% of home purchases this year used all cash—the lowest share of the metros Redfin analyzed. Next came Richmond, VA (16%), Los Angeles (16%), San Diego (16.2%), Lake County, IL (17.2%), Sacramento, CA (17.7%), San Francisco, CA (17.8%), Oxnard, CA (18%) and Bakersfield, CA (19.3%).