Want to Buy a Home in One of These 17 Markets? You’d Better Have Cash

Cash purchases still dominate in some housing markets. Here's why.

In 2005, Randy Moss, then a wide receiver for the Minnesota Vikings, pretended to moon Packers fans after scoring a touchdown. The NFL fined him $10,000. Asked by a reporter how he would pay, Moss responded succinctly: “Straight cash, homey.”

While cash purchases have dropped since the housing market bottomed out in 2012, many areas are still dominated by buyers taking the Moss approach when buying a home. According to data published by ATTOM Data Solutions (formerly RealtyTrac), at least 45% of the sales made in 17 metro areas were conducted using cash in 2016.

Cash sales are common in Florida, where retirees use the proceeds from sales in their home markets to buy retirement properties. But in other places, the prevalence of cash sales is driven largely by institutional investors, which ATTOM defines as any entity that buys at least 10 properties in a year, said Daren Blomquist, senior vice president for the property data company. In Binghamton, New York, where nearly 70% of home sales in 2016 were made in cash, the rise of such purchases over the past three years mirrors a rise in institutional investor sales.

The following are the 17 metro areas where cash sales were most common in 2016. (A note about the data: Some states are not required to disclose property sale information publicly, so there’s no cash-sale data for Alaska, Indiana, Louisiana, Missouri, New Mexico, Texas or Utah. Percentage denotes portion of total home sales that were made in cash.)

  1. Cape Coral-Fort Myers, Florida: 45%
  2. Huntington-Ashland, West Virginia, Kentucky, Ohio: 45.7%
  3. Trenton, New Jersey: 46%
  4. North Port-Sarasota-Bradenton, Florida: 47.2%
  5. Fort Smith, Arkansas, Oklahoma: 47.6%
  6. Ocala, Florida: 47.7%
  7. Urban Honolulu, Hawaii: 47.7%
  8. Atlantic City-Hammonton, New Jersey: 48.3%
  9. Reading, Pennsylvania: 48.4%
  10. Miami-Fort Lauderdale-West Palm Beach, Florida: 48.8%
  11. Raleigh, North Carolina: 50.1%
  12. Naples-Immokalee-Marco Island, Florida: 52.4%
  13. Montgomery, Alabama: 52.5%
  14. Macon, Georgia: 52.5%
  15. Syracuse, New York: 58.4%
  16. Buffalo-Cheektowaga-Niagara Falls, New York: 63.6%
  17. Binghamton, New York: 69.4%

Who’s Got All That Cash?

Institutional investors — mostly big banks — gobbled up lots of houses after the recession in big markets like Phoenix and Atlanta, but smaller copycats, operating in smaller markets, adopted the practice in recent years. These mid-tier investors usually seek homes priced around $150,000 or less, Blomquist said.

“They’re looking typically for starter homes they can rent out to people who would otherwise be first-time home buyers,” he said.

Recently, a number of web-based companies that allow individuals to buy, rehabilitate and rent properties remotely have sprung up, Blomquist said. These companies, like, for example, HomeUnion, Investability and Roofstock, typically pay cash for properties as well.

Institutional buyers can squeeze out regular folks looking to buy homes for themselves, but there’s good news for these people. Blomquist expects the practice to become less prevalent as banks become more willing to finance purchases. A drop in distressed sales, which in many states must be conducted in cash, should also contribute to a decline in cash purchases.

If you are looking to finance a new home, be sure to check your credit score to make sure it’s up to snuff — your lender certainly will. You can review two of your credit scores for free, updated every 14 days, on Credit.com. And make sure to avoid the pitfalls a lot of first-time homebuyers make.

Image: courtneyk

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