The Rise of All-Cash Homebuyers Has Come Home to Roost
Since the pandemic, home prices all across the country have risen dramatically. This is both good and bad news. It’s good news because it means the investment in your property has grown significantly in just a very short timeframe. But it’s bad news if you’re looking to purchase a home since you will be paying a lot more than you have in the pre-pandemic period.
Recognizing the profits to be made in the home real estate market in the 2020s, all-cash homebuyers are becoming more and more common. These real estate buyers differ from traditional real estate agents in that they offer cash for an available home “as is.” This means you don’t need to make costly repairs or renovations prior to putting the home up on the market. You don’t even need to clean the place if you don’t want to.
Says the professionals at The Friendly Home Buyer, professional house buyers, they have the cash it takes to buy your home. Most of the “cash buyers” out there will not be able to close on your home unless they are able to entrust another professional buyer who actually has the cash on hand to assign their purchase agreement to. Most reputable professional house buyers get several inquiries per week from buyers who wish for them to buy out their contracts.
Clearly, having cash on hand is a powerful tool when it comes to purchasing residential real estate “as is.” That said, what does the rise of the all-cash homebuyer mean for the real estate market as a whole in 2024 and beyond?
According to a new report by MSN, for the majority of Americans, owning their own home is a major goal. Three-quarters of the adult population still believe that home ownership represents the epitome of the American Dream, or so claims a survey conducted by Bankrate Financial Security.
However, over the course of the past three years, attaining the American Dream has become more challenging than it’s ever been since the Great Depression of the 1930s. Steep prices and out-of-control mortgage and interest rates aren’t completely to blame. That’s because recently, a proliferation of all-cash home real estate purchasers have entered the home-buying equation. While this can be a positive development for the home-buying industry, it also presents new challenges in what’s considered a daunting market for optimistic, would-be young purchasers.
At base, all-cash homebuyers are not required to obtain a mortgage loan to purchase a home since they are able to pay upfront for a home that’s on sale “as is.” Due to hefty mortgage rates and sky-high inflation, cash transactions are said to have spiked to their highest level in a decade or so, according to a study conducted by Redfin in late 2023.
Why There’s a Rise in All-Cash Home Buys
Blame the Washington DC money printer that goes “brrrrrrrrr” every single day. The result is not only a deflated dollar and high inflation but record high mortgage rates, which are the single most dominant factor in a difficult real estate market. This is why buyers are doing their best to circumvent the painstaking process of applying for a mortgage and, instead, doing their best to pay with cash.
The alternative is to be priced out of the market by the high mortgage rates. For wealthier persons, it only makes sense to buy with cash these days rather than pay all that interest. However, those people who don’t have access to lots of cash stand the chance of being pushed aside.
Who Are the All-Cash Home Buyers?
Who exactly are these buyers who happen to have a lot of cash lying around in a cash-poor economic environment? According to the National Association of Realtors or the NAR, from a nonprofessional point of view, they tend to be mature, repeat homebuyers. They are comprised mostly of the Baby Boomer generation, ages 68 to 76. It’s said that half of Baby Boomers found themselves in the position to purchase a home last year using only cash, while a third of younger baby boomers, ages 60 to 67, were able to buy with cash.
Also, the Silent Generation is said to make up less than 5 percent of recent purchasers, but 53 percent of them used cash to buy a home. Keep in mind that older buyers are a lot less likely to be first-time home buyers. They are usually looking to sell their existing family home to purchase a smaller, more manageable home in a new state that boasts less taxation. It’s all the equity they’ve built up in their existing family home for decades that allows them to put up the cash for their next home sale, which means no financing is required.
From a professional real estate point of view, the good news is that if you’re a young buyer who doesn’t quite have all that cash on hand yet, you can contact a reputable professional home buyer and discuss financial terms with them that are agreeable to both parties. Because you will be avoiding the mortgage lending process, you just might find yourself in the new home of your dreams far faster than you ever imagined.
