In Key West as well as the rest of the nation more buyers are paying cash for real estate. According to the National Association of Realtors nation wide 28% of all sales in 2010 were cash sales. In 2008 it was only 14%. Additionally it seems that areas that have been hit hardest by the down turn in prices; Nevada, California, and Florida are affected the most. Cash buyers made up over half the sales in the Miami-Fort Lauderdale area last year. In Phoenix 2010 cash sales were 42%, three times more then in 2008.
It makes one wonder why this is, with interest rates so low. One reason is that many buyers who have cash don't have many good choices where to put their money. Savings accounts and CDs pay almost nothing and the public is still skittish about the stock market. On the other side of the coin real estate prices have gotten so low that buyers perceive that the bottom is here. I receive so many inquiries from Baby Boomers who have saved a lot over their professional careers. They have been to Key West many times but never thought they could afford to buy here. Now they can and they are willing to pay cash. Over all prices in Key West dropped from 2009 to 2010, but number of sales are up and our condos and townhouse, which are favorites for vacation homes, are actually going up in value (6.6% from 2009 to 2010).
Another good reason for paying cash if you can is that buyers can get a 5% to 10% discount on a property if it does not require mortgage approval. Seller, especially bank owed properties, strongly prefer cash buyers. The transaction closes quicker and there is no risk of the buyer losing their job, the property not appraising or the bank changing their mind. Not only can the cash buyer snap up these homes at a discount, but they do not have to get involved with what has become a very long and tedious process with tightened lending guidelines in order to get a mortgage. Even people with good credit and ample down payment are often turned down.
As for my personal sales 60% were cash buyers in 2010 versus 28% in 2009. Another researcher shows overall Key West cash sales in 2010 to be 48%, still well above the national average and similar to those figures being report in the Miami-Fort Lauderdale area. Below are several major cities and their percentage of cash transactions in 2010.
Miami: 54.2 percent
Las Vegas: 45.9 percent
Tampa, Fla.: 44.6 percent
Phoenix: 35.6 percent
Stockton, Calif.: 29.1 percent
Chicago: 23.4 percent
San Diego: 23.1 percent
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