It’s all about cash in most Palm Beach County housing transactions. The county ranked second in the nation for the portion of all-cash home sales at 59.9 percent as of March, according to a CoreLogic report.
That trails only Philadelphia at 60.7 percent. Three other Florida counties stood right behind Palm Beach: Sarasota at 59.5 percent, Lee at 59.3 percent and Miami-Dade at 58.3 percent.
So why does Florida lead the way, especially Palm Beach County, when it comes to cash?
“First, unlike other hard-hit markets like the Southwest and California, Florida’s housing market was slower to rebound,” Molly Boesel, senior economist for CoreLogic, told The Real Deal. “That’s because it is a judicial foreclosure state, which means it has taken much longer to clear the distress.”
And it’s distress investors who tend to pay in cash.
But Peter Zalewski, principal of Miami-based consulting firm Condo Vultures and TRD columnist, sees it differently. “Distressed sales east of I-95 were over in 2010,” he said.
Zalewski agreed with Boesel’s second explanation: that financial woes in foreign countries, especially Latin America, drove investors from those countries to South Florida real estate. And foreigners tend to pay with cash.
After the South Florida housing market crashed in 2007-10, financing for mortgages dried up, so buyers purchased in cash. But prices are now much more attractive in Palm Beach than Miami-Dade, Zalewski notes.
In the first five months of the year, residential properties cost an average $1.08 per square foot in Palm Beach compared to $2.80 per square foot in Miami-Dade. “Foreign buyers are jumping to the North — Broward and Palm Beach,” Zalewski said.
But both he and Brown expect the percentage of all-cash purchases in South Florida to slip. Indeed, in Palm Beach, the March figure of 59.9 percent already represented a substantial decline from 65.7 percent a year earlier.
The booming dollar, which has hit multiyear highs against a range of currencies in recent months, will help push foreign, hence cash, buying down, Zalewski said.
Already condo and town home sales dropped 6 percent in Miami-Dade during the first five months of the year, though they gained 3 percent in Palm Beach, thanks to a smaller percentage of foreign buying and lower prices.