According to CoreLogic, a California-based financial data company, 50.9 percent of Florida’s June property sales were all cash transactions. The Cape Coral-Fort Meyers area led the country in sales completed entirely with cash at a resounding 61.2 percent. Four other Florida locales followed closely behind: West Palm Beach-Boca Raton-Delray Beach, North Port-Sarasota-Bradenton, Miami-Miami Beach-Kendall and Fort Lauderdale-Pompano Beach-Deerfield Beach. The numbers reported for these areas far exceed the national average of 33 percent. Historically, cash sales comprise only a quarter of the market, however all-cash transactions peaked at over 46 percent in 2011 and remain much higher than their historical average. If you like data, here are other interesting Miami Real Estate Graphs that illustrate some trends since the unimpressive 2008 year for real estate.
So what does all this mean for buyers? First, cash sales are quick and easy, with no debt costs included. With all cash sales accounting for more than half the sales in Florida, there’s not an exorbitant level of leverage being used to artificially bid up prices. Prior to the market crash in 2008 lenders were willing to underwrite loans for 90, even 100, percent of the value of the property with very lax underwriting standards on the borrower and underlying asset. This allowed buyers to get away with having no equity stake in the home they were purchasing. This led to owners whom, if they could no longer afford the monthly mortgage payments, had no problem having the property foreclosed on. For these individuals it was easier for them to walk away than to keep a property worth less than the outstanding mortgage amount.
To put it simply, the current housing market here in Florida, and Miami real estate in particular, is on a much more solid footing than it was during the run up to the 2008 housing collapse. When a buyer chooses to pay in all cash, they generally pay the market value for the property. Period. Because they’re using all their own resources to finance the purchase, they’re much less willing to pay a higher price than what they value it at. If, say, the buyer were allowed to leverage a larger amount of the price of the house, they may be much less concerned with the total dollar figure. Pre-crisis lenders had underwritten loans like this – such is not the case today. Cash truly is king.