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Why Cash is King in Chicago

by James F. McClister

New research from Redfin reveals home buyers in major metros are abandoning their check books for the more comfortable feel of cold, hard cash. How does your area stack up?

In the wake of tightening mortgage lending standards, diminishing investor interest and, in some places, a smaller residential inventory, many home buyers are now saying “farewell” to the home loan process and instead putting their trust in the almighty green. That’s right, I’m talking about all-cash purchases.

Since 2011, all-cash purchases have been on the rise, slowly and steadily taking up a bigger and more significant portion of the overall market. According to research from Redfin, many of the country’s larger metro areas, including Miami, Chicago and Las Vegas, are experiencing this phenomenon nearly simultaneously – though some are more affected than others.

While homes priced from $50,000 to over $1 million have been purchased using only cash, Redfin’s work revealed the majority these transactions occur on either the lower or higher end of the home price spectrum.

Chicago Buyers Prefer Cash

Like most cities, all-cash purchases in the Chicagoland area are exceedingly typical for the very cheap and somewhat for the very expensive. However, middle to upper middle tier properties priced between $200,001 and $900,000 tend to garner an all-cash purchase rate in the mid-twenties. Once home buyers start looking beyond those price ranges, that’s when all-cash purchase offers start to become commonplace, especially for the super affordable.

For Chicagoland homes ranging in price from $50,000 to $100,000, Redfin found 65 percent were purchased using all-cash. Homes priced up to $200,000 fetched an all-cash purchase rate in the mid-30s and anything more than $900,000 a slightly less, but still impressive 28 percent.

According to Redfin, more than 50 percent of large metro inventories fall between the $200,0000 to $600,000 range, which mean a majority of homebuyers in Chicagoland will never come up against an all-cash offer.

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