How Homebuyers Scrape Together All-Cash Offers
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Here's your Money Briefing for Tuesday, June 14th. I'm J.R. Whelan for The Wall Street Journal. We've talked about how some prospective homebuyers are jumping the line and locking in sales by making cash offers. But with prices 40% above where they were at the start of the pandemic, what can you do if you don't have enough cash on hand to seal the deal?
I've talked to homeowners who are, you know, getting together with a couple members of their family, kind of just taking their savings, their life savings. So they are trying to take advantage of that and, you know, buy a home when they can, even if it's on the lower end of the housing price spectrum.
Coming up, we'll talk with WSJ consumer finance reporter Orla McCaffrey about other creative ways homebuyers are scraping together funds and why a cash offer isn't necessarily a guarantee you'll get the house you want. That's after the break.
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Mortgage rates may be rising, but the competition to buy a home is still fierce.
What is the episode about and why are cash offers important now?
Some buyers have been able to solve the competitive logjam by swooping in with cash, but others don't have a huge nest egg that they can tap into. WSJ reporter Orla McCaffrey joins us to discuss how some homebuyers are finding creative ways to put together an all-cash deal. Orla, thanks so much for being with us.
Thanks for having me.
So, you know, Orla, it wasn't unusual for homebuyers to pay with cash when mortgage rates were near record lows and competition was fierce. But why is cash still common when we hear so much about the housing market cooling?
So the market is cooling, but it's still very competitive. There's still so few homes on the market. So even if demand has decreased a little bit, even if there are fewer offers on each home, that inventory is still so tight that you're still getting multiple offers on homes and in some areas, multiple cash offers. And for sellers who want to sell quickly and hopefully get out there on the market and find their next home, cash just really speeds up the process and makes it more secure. Cash has been common during this kind of two year housing boom that we've seen during the pandemic, and it hasn't cooled off even as the housing market has slowed in terms of sales in the past couple of months. So about 28% of home sales in March were paid in cash that went down to about 26% in April, but that is still well above pre-pandemic levels.
So who typically makes cash offers?
So it's people who have the cash on hand, right? So it's people who just sold a house and realized a lot of equity gains through price increases the past couple of years. Or it's people who have enough money in different investments in the stock market, maybe part of it in a savings account where they can show that they have this money on hand, make a cash offer. and then get a mortgage right after buying the home. That's called delayed financing. And a lot of the times it's older folks, people who have owned homes for a while who are maybe trying to downsize and have a life's worth of savings on hand.
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