Home buyers in Cape Coral-Fort Myers are second in the country in paying cash — stimulating the local real estate industry but creating potential dangers ahead.
The Cape Coral-Fort Myers metro area had 64 percent all-cash home purchases in May, according to a report released today by Irvine, Calif.-based financial data provider CoreLogic.
Florida was the No. 1 cash purchase state with 53.4 percent.
All that cash is flowing into the area because of the newly strict oversight by federal regulators of bank loans, plus low interest rates that make it unattractive to simply leave large amounts of money in a bond or a certificate of deposit, said Brett Ellis, head of The Ellis Team with Remax Realty Group in Fort Myers.
"It's easier to get a loan than it was two years ago," he said. "But there are additional restrictions they're putting on. A lot of buyers have the money, they think Florida's a good value but they don't want to jump through all those hoops."
Also, Ellis said, "A lot of people think there's going to be a stock market correction, so real estate seems to be the place to park your money."
One consequence of all this is that it's the more expensive homes that tend to be purchased with cash, he said — lower-end buyers have to take their chances with the bank loan process.
But interest rates likely will start rising in a year or two and that could be a game changer, said Bob Knight, co-owner of Cape-based Paul Homes.
The home-building industry in Southwest Florida has been trending stronger recently, but still isn't in shape to deal with a serious hit such as a sharp increase in interest rates, he said.
Higher interest rates, Knight said, could prevent some people from buying a house altogether while even those with the ready cash could decide to keep their money in the bank.
That could cause trouble for the slowly improving housing market here, he said.
"We're in recovery mode," Knight said. "We're not recovered yet. It's a fragile recovery headed in the right direction."