Prior to the 1930s, homes were purchased with 50% down payments and short-term five-year loans that ended with large balloon payments.
Modern long-term fixed-rate mortgages became common following the Great Depression, when the U.S. government established the Federal Housing Administration in 1934. In 1936, the Federal National Mortgage Association (Fannie Mae) created 15- to 30-year amortized loans.
That’s a quick background on the way we do business today, but just because we have a thriving mortgage system doesn’t mean cash transactions aren’t popular.
According to Redfin, in March roughly three in 10 homebuyers (28.8%) paid for residential properties using all cash. That share was down from 29.8% a year earlier. The all-cash purchasing method peaked at nearly 35% in 2023 when mortgage rates hit a two-decade high of almost 8%.
Redfin feels cash buyers have recently withdrawn some from the all-cash position. This could be a reflection of the economy leaving buyers with the feeling that dropping a huge chunk of money into a home could be risky and leaving more cash on hand would be preferable.
The markets where all-cash transactions are the most prevalent are Cleveland and West Palm Beach, where more than half of all March home purchases were made in cash in both locations. West Palm Beach attracts a lot of affluent retirees and second homebuyers, while Cleveland has a large number of relatively lower priced homes for sale.
Nevertheless, all-cash transactions still have many advantages. Zero financing usually means zero risk compared to buyers who are waiting to qualify for financing.
The all-cash approach usually speeds up the purchasing process because there aren’t any lenders waiting for an appraisal; and it’s not uncommon for cash buyers to waive inspections and repairs in return for offering sellers a quick closing. Cash offers will typically appeal to sellers, particularly in a seller’s market where cash offers stand out. Cash offers are always considered the gold standard of real estate offers.
Published by the Realtor Association of Sarasota and Manatee, the Manatee County sales statistics for May include cash offers. Single-family homes closed 0.5% fewer properties in May this year compared to last year. The median sale price was $460,000, down 3.8%, and the average sale price was $667,503, up 4.5%. Median time to contract was 47 days, compared to 52 days last year. Pending inventory was up 21.9%. Cash sales were down 0.5%.
Condo sales closed 8.7% more properties this May compared to last May. The median sale price was $297,000, 5.1% less than last year. The average sale price was $341,985, down 1%. Median time to contract was 61 days, compared to 60 days last year. Pending inventory was up 0.6%. Cash sales were up 8.1%.
In addition, inventory was down 15.4% for single-family homes and 20.3% for condos. Declining inventory and an increase in pending inventory are pointing to a lot of buyer activity.
We have a fair and solid mortgage system in this country and we should all be grateful for it. Because of what the government instituted in the 1930s, we’re largely a country of homeowners. However, don’t forget that cash is still king and the envy of all.
