More and more homebuyers and investors are coming to the negotiating table and closing deals with cash in hand.
A third of all U.S. single-family homes and condominiums sold in the second quarter were purchased with cash, up from 20.6 percent a year prior. It was the highest percentage since the first quarter of 2015, according to L.A. Biz.
In a number of states and cities, cash accounted for the majority of sales. Across Georgia, 62.1 percent of homes that sold were bought with cash, a 147 percent increase over 2020. In Michigan, 58.4 percent did, and 52.5 percent in New York.
Some individual metro areas saw even higher percentages. The highest were Buffalo and Detroit, where 71 percent and 68.1 percent of sales were cash, respectively.
Both of those cities suffered huge drops in population as the Rust Belt lost manufacturing jobs in the late 20th century, and some homes fell into disrepair and lost most of their value. Bargain-hunting house flippers and single-family rental investors with cash on hand may now be squeezing out traditional homebuyers in those markets.
Cities and states with growing shares of cash buyers tended to see a drop in the number deals closed with Federal Housing Administration loans. FHA loans are popular with first-time homebuyers because they offer low down payments, but usually require insurance fees to offset the risk of default.
Investors since the pandemic have thrown money into the single-family rental space, first anticipating widespread foreclosures — which had birthed the single-family rental business during the last financial crisis — and now marketing to families priced out by record-high home valuations.
[L.A. Biz] — Dennis Lynch