2021 has been the year of the cash home buyer, and in some metro markets in Florida and New York, it's difficult to compete for homes unless you are liquid or have access to cash. Prospective home buyers looking to make themselves stand out in a competitive real estate market are going the cash route when buying homes. This gives them an advantages over other prospective buyers who are relying on getting a mortgage to complete the purchase.
Why Having Cash is King in 2021
According to an article on Bloomberg that depicted an analysis of county records by Redfin Corp, an astounding 30% of all real estate purchases (we're talking exclusively about residential homes here) were paid for in all cash. This number is up from 25.3% from the year 2020. This is the largest percentage of cash buyers since 2014, according to the report. As mentioned earlier, this is a massive advantage when shopping for homes and making offers, as home owners are looking for a quick, easy close, which having cash essentially does.
Part of the reason people are able to buy homes for cash in 2021 is the recent stock market rally. Just in the last year, the S & P 500 is up more than 35%. Another reason is that cash heavy families have fled expensive markets like New York or California to find a new home in a more affordable real estate climate.
In our backyard of Florida, in addition to New York, more than half of the homes sold were sold without mortgages. On the contrary, cash buyers in California were far less. Of course, the price of homes in California is much greater when compared to Florida.
This move towards buying in cash has had an impact on the market. Companies are figuring out ways to help people who require financing in order to compete with the abundance of cash buyers. Even Zillow is getting involved in the mix by offering cash for homes based on the estimated property value.
The demand for housing started to surge last year when the pandemic began to change buying habits from apartments and condos to homes with more space. Facing a lock down, many people traded their City life for a move to the suburbs.