One-third of U.S. Home Sales are Using all cash – More in Florida
The fact that more homebuyers are using all cash for buying a home should come as no surprise. With the average 30-year fixed mortgage rate at about 7.4% it makes good economic sense. After ball, online bank rates hover at just 4 to 5%. Even treasury bills (depending on short term or long term are also around 4 to 5%). Although T-bills are exempt from state and local tax, it still is a far cry from 7.4%.
To put it more succinctly, why earn just 4 to 5 percent on your interest income when you are paying out on your mortgage 7.4%. It makes far more sense for your personal finances (for those who can afford it) not to take that monthly loss.
One-third of U.S. homes were cash sales – the highest level since 2014. But in Florida the numbers are even more staggering. It ranges from 35.1% in Orlando up to 53.6% in West Palm Beach.
According to Redfin (a technology-based brokerage firm): All-cash purchases are making up a bigger portion of the homebuying pie for one major reason: Elevated mortgage rates are deterring homebuyers who take out mortgages more than they’re deterring all-cash buyers.
While overall home sales were down nationally 31% last year, cash sales were down just 35%.
Although there is a downturn in sales, conventional loans still comprise 78.8% of mortgage loans, yet this is down from 83.7% last year.
Redfin agents in pandemic homebuying boomtowns like Orlando report that they saw an uptick in FHA loans. High mortgage rates may also encourage buyers to choose FHA loans which hover a bit lower at about 6.5%.
Jumbo loans, however, have become less popular as rates stay elevated. Just 6.1% of mortgaged home sales used a jumbo loan in April, down from 10.6% a year earlier but up from the decade-low of 4.3% hit in January. That trend varied in Florida metros but was still down in all metros listed.