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Cash Isn’t King for Homebuyers

The acceleration of the decline of cash buyers continued in June, as a new report in USA Today [1]reveals that just 16% of home buyers paid in cash. 

The report, which sources information from the National Association of Realtors (NAR) [2], states that the shifts can be traced to less competitive and buyers-friendly markets, and falling mortgage rates.

The NAR states that existing home sales fell 4.2% in the first half of the year compared to 2018. 

Prospective homebuyers paying in cash has seen a steady decline over the past few years. USA Today reports that the volume of cash sales peaked at 35% in February 2014. That number dipped dramatically just a few months after, falling to 23% in August. 

According to the data, 22% of buyers in June 2018 paid with cash. 

The lack of bidding wars has also caused the decline of ding to cash offers, as many were “cashing in their savings,” according to Jessica Reinhardt, a broker at RE/MAX Alliance in Denver. She added sellers prefer cash offers because they mean quicker purchases.

Additionally, the report says that parents gave cash gifts to help their children buy homes, with some real estate brokers putting up cash for their clients, said Jessie Culbert, a Redfin agent in Seattle. 

“You needed cash to stand out,” Culbert said.

Competition has waned nationwide, as 12% of purchased handled by Redfin faced competition—a drop from 51.7% last year.

The NAR states that 57% of investors who buy homes to make repairs or sell for a profit pay in cash. However, the volume of home purchases made by investors has declined from 11.3% in 2018 to 11.1% in 2019, according to figures by CoreLogic.

Also, many prospective homebuyers are less eager to buy homes in fears that prices have peaked. Home prices have increased 55.2% nationally from their 2013 low, and are 12.6% above the pre-housing crash peak, according to the S&P CoreLogic Case-Shiller Home Price Index.