A growing number of retired baby boomers are turning to cash deals to pay for properties, rather than a mortgage, Bloomberg News reports.
In the first quarter, 29% of non-investment homebuyers used cash, the highest on record for the period, while lending for mortgages to purchase homes fell to $115 billion in the first quarter, the lowest in three years, Bloomberg reports.
U.S. home-price gains have restored $3.8 trillion of value to owners since the beginning of the real estate recovery in 2012, Bloomberg reports, citing Federal Reserve data. Home-price gains have allowed some baby boomers to use home equity to purchase new property.
“In the first three months of 2014, buyers plunked down $105.1 billion of their own money for properties, compared with $84.7 billion a year earlier,” Bloomberg reports.
The majority of people making all-cash deals are baby boomers mostly because America’s largest-ever generation is beginning to retire, Lawrence Yun, chief economist of the National Association of Realtors, tells Bloomberg.
“In 2012, there were a record 61.8 million Americans over the age of 60, according to the Census,” Bloomberg reports. “That compares with 46.6 million in 2000.”
Mike Trafton, 55, and his wife Cindy, 54, said they recently paid $400,000 in cash for the 3,200-square-foot house in Boise, Idaho after selling their 4,400-square-foot home in a Portland, Oregon, suburb for $680,000.
“At this stage in our lives, we can afford it, and it’s better than having a monthly mortgage payment hanging over us,” Mike Trafton tells Bloomberg about their financing choice.
Trafton also tells Bloomberg going without a mortgage gives him “peace of mind.”
Read the Bloomberg article here.
Written by Cassandra Dowell