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Analysts have come up with several different spins on why cash was king for home sales in the first quarter of 2014.
Depending on source, the reasons vary from: competition, stricter mortgage lending practices, first time home buyers, investors, and boomers down sizing.
With Florida leading the country in cash sales for the first quarter, I tend to think the market is being driven by retirees or folks looking towards retirement -- and who are downsizing and paying cash so they won't have a mortgage going into retirement.
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Once riddled with foreclosures, Cape Coral, Fla., had the highest level of all-cash deals at nearly 74% of first quarter sales, according to RealtyTrac. Four other Florida cities followed: Miami (67%), Sarasota (65%), Palm Bay (64%) and Lakeland (62%)
There has been much discussion about Boomers "not being prepared for retirement." I think this is one strategy that is putting Boomers in a better position to deal with retirement financial restrictions. Statistics show that the majority of folks at retirement age right now do not have the amount of savings typically projected for survival into old age. Without a mortgage -- and no rent to pay -- Boomers are creating a strategy which will allow them to live off social security and modest savings, since most new retirees, other than government employees, do NOT have pensions.
I have heard that cash sales are booming. Actually cutting out those who must go to a bank.
Floridas lower prices made it easier to buy there, but Florida has made a huge comeback.
I have heard that cash sales are booming. Actually cutting out those who must go to a bank.
Floridas lower prices made it easier to buy there, but Florida has made a huge comeback.
Yes, it has been an amazing uptick after the terrible foreclosure situation in Florida.
I think that alone points to how many folks are buying retirement homes with cash as a strategy towards managing their finances.
This is an interesting article in re: to whether or not to pay off one's mortgage, the benefits of having no mortgage, relocation and longterm impact in retirement, etc.
It is my feeling that for many of us, owning that "roof over our heads" is at least psychologically beneficial, even if it isn't perhaps that beneficial financially. In my situation, the financial impact is definitely important but the psychological impact (feeling secure about my future living arrangement) is also very important.
I do believe that downsizing and paying cash for a retirement home could be a very good strategy for many folks. Not everyone has $1 M in savings, 401K, pension value, etc. but real property is an asset on those balance sheets.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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That's our plan, assuming prices continue to rise as they are now in our area. We will expect to have more than enough equity when we sell to pay cash for a home in a lower cost area and have to pay only taxes and insurance. There are still many people now in their 60s that have been in their home long enough to pay it off or at least way down, that don't move every 5-7 years like younger people seem to be doing now.
One thing the NCPA article neglected to point out is that if someone is actually moving from a state with a high cost of living to a state with lower cost of living, their "downsizing" isn't really. A $250k home in parts of Texas is probably equivalent to a home worth easily double that in New Jersey.
One set of my grandparents lived in the same house for 60 years. The other set retired to Alabama and purchased a much cheaper and smaller home. My mom retired this year and is debating whether to pay of her house this year or pay cash for a smaller house next year.
Our plan is to have our house paid off the year we turn 50. The last kid will hopefully be out of college and "launched" by the time we are 53. That means by 55 we can downsize to a home 1/2 - 2/3 the size of this one. Extra cash goes into savings, savings on property taxes lessens our expenses...and if all the planning has gone well, maybe we can retire early
This is an interesting article in re: to whether or not to pay off one's mortgage, the benefits of having no mortgage, relocation and longterm impact in retirement, etc.
It is my feeling that for many of us, owning that "roof over our heads" is at least psychologically beneficial, even if it isn't perhaps that beneficial financially. In my situation, the financial impact is definitely important but the psychological impact (feeling secure about my future living arrangement) is also very important.
I do believe that downsizing and paying cash for a retirement home could be a very good strategy for many folks. Not everyone has $1 M in savings, 401K, pension value, etc. but real property is an asset on those balance sheets.
We will eventually buy down from this house, which we bought low anyway, with a profit after renovations, and buy a humble abode with cash. It will be the final place before Happy Acres. I envision a place that will be more like a salt-shingled cottage and will remain shabby chic. The nice thing about cash, for a seller, is that the property doesn't get tied up for weeks on end waiting for the final mortgage loan, and without a mortgage, a lender's appraisal is not part of the deal. The nice thing for the buyer is that with cash, an offer considerably lower than the asking price may be accepted.
One thing the NCPA article neglected to point out is that if someone is actually moving from a state with a high cost of living to a state with lower cost of living, their "downsizing" isn't really. A $250k home in parts of Texas is probably equivalent to a home worth easily double that in New Jersey. .....
Quite true, of course. "Downsizing" usually means that the physical size of the house or dwelling (measured in square feet) becomes smaller. However, what you described I think of as "financially downsizing", meaning that one has less money tied up in the house and has "liberated" a bunch of money to use for other things or to increase the size of the more liquid portion of the nest egg.
If someone sells a $500,000 house in an expensive part of New Jersey (just to continue with your use of New Jersey as an example) and buys a nearly identical house in Texas or Tennessee (or any number of other less expensive places) for $250,000, then the person doesn't really have to worry so much about having a physically smaller house to minimize the cost of utilities and maintenance.
How many of the homes are actually "people" buying them vs. companies buying them and turning them into rentals?
When I lived in Atlanta in 2012, large numbers of homes were being scooped up by investment companies who would then do minimal repairs and touch ups and put them on the rental market.
That's our plan, assuming prices continue to rise as they are now in our area. We will expect to have more than enough equity when we sell to pay cash for a home in a lower cost area and have to pay only taxes and insurance. There are still many people now in their 60s that have been in their home long enough to pay it off or at least way down, that don't move every 5-7 years like younger people seem to be doing now.
Bada Bing!
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