Number of home buyers paying with cash increasing

One of the real estate industry trends of 2013 was fairly easy to spot. Cash buyers accounted for one-third of all home sales in the past 12 months. This is about where it has been for the last three years.

Surprisingly, cash home sales took a jump in November, according to RealtyTrac. Cash sales accounted for 42 percent of all homes purchased in November, which is the highest level since RealtyTrac began tracking it. The percentage of cash sales in October was higher than average at 38.4.

Who pays cash?

There are certain segments of the population that have the liquid assets available to pay cash for homes.

  • flippers
  • retirees who are downsizing
  • wealthy who are investing or purchasing vacation homes
  • investors who expect the market to improve enough for a good return on investment through rentals
  • overseas buyers
  • people who have trouble getting financed

What it means

While the housing market is slowly heading back to normal, the rising number of cash sales is a sign that recovery is not complete. The pace is simply not sustainable.

The trend upward in cash-only sales began when mortgage rates began to tick up. Buyers with cash are willing to forego the tax advantage of carrying a mortgage to save on interest. Other savings for cash buyers include loan origination fees, appraisals and some closing costs.

Other advantages for cash buyers include avoiding the loan qualification process and the ability to close the deal very quickly.

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