A record number of home owners are using the increased equity in their current homes to buy their next homes in cash and avoid the mortgage process altogether, Bloomberg reports.
About 29 percent of non-investment buyers used cash to fund their housing transactions in the first quarter of this year — the highest level on record, according to data compiled by Bloomberg.
Those Baby Boomers
Baby boomers make up a large bulk of these all-cash deals, says Lawrence Yun, chief economist for the National Association of REALTORS®.
“Cash purchases are on the rise because older home owners who have decades of home-equity accumulation don’t want the hassle of a mortgage,” Yun says. “With the economy improving and the stock market at record highs, boomers are the ones who are driving the market.”
Meanwhile, the share of investors — who usually use cash — is dwindling, dropping in the first quarter to the lowest level since 2010.
“The whole investor class, the ones doing most of the cash purchasing until now, is stepping back,” Yun says. “Baby boomers are taking their place.”
Members of the baby-boom generation have more home equity than their parents because they owned homes during the biggest 30-year housing bull market in history. The median U.S. price of an existing home in April was $201,700, triple the $67,800 median price in 1982 when many were buying their first properties.
Just as they transformed societal norms and politics as college students in the 1960s and 1970s, the generation will change the housing market as they age, said William Frey, a senior fellow at the Brookings Institution in Washington who specializes in demographics. About 16.3 million Americans older than 60 owned their homes free and clear in 2012, according to Census data. In 2009, that number was 12.1 million.