Home Owners Doing Record Number of Cash Deals

A record number of home owners are using the increased equity in their current homes to buy their next homes in cash and avoid the mortgage process altogether. About 29 percent of non-investment buyers used cash to fund their housing transactions in the first quarter of this year — the highest level on record, according to a new Bloomberg report.

Baby boomers make up a large bulk of these all-cash deals, says Lawrence Yun, chief economist for the National Association of REALTORS®.

“Cash purchases are on the rise because older home owners who have decades of home-equity accumulation don’t want the hassle of a mortgage,” Yun says. “With the economy improving and the stock market at record highs, boomers are the ones who are driving the market.”

“The whole investor class, the ones doing most of the cash purchasing until now, is stepping back,” Yun says. “Baby boomers are taking their place.”

Baby boomers have more equity than previous generations because they may have owned a home during a 30-year “housing bull market.” In April, the median price of an existing-home was $201,700 compared to $67,800 in 1982, when many boomers had purchased their first properties, Bloomberg reports.

Baby boomers are expected to remain a strong presence in the housing market much longer than previous generations, too.

Source: “Cash Property Deals Reach Record with U.S. Boomers Retiring,” Bloomberg Businessweek (June 2, 2014)