Cash is king for Beaufort County's upscale real estate market

dburley@islandpacket.comMay 8, 2014 

A home for sale in Bluffton Park off Red Cedar Street seen on May 8, 2014.

THEOPHIL SYSLO — Theophil Syslo Buy Photo

Wealthy, retiring baby boomers are moving to the area, and they're paying cash for homes when they get here, Lowcountry real estate agents and mortgage lenders said Thursday.

The trend, which is also evident in other markets, is due in part to the lingering effects of the recession.

"It's something we've been seeing for a few years," said Edward Dukes, managing partner at Beaufort-based Lowcountry Real Estate. "It's the comfort of knowing you don't have debt, and I think the paradigm might be shifting that way a bit."

One in three buyers of U.S. homes is paying cash, a record high, according to data made available to McClatchy Newspapers.

All-cash sales as a percentage of residential real estate sales stood at 33 percent from January to March this year. That's up from 31 percent in 2013 and 2011 and 29 percent for 2012. Those are the highest percentages since the National Association of Realtors started collecting the data in 2008. Before that, it estimated that cash buyers historically represented less than 10 percent of all sales.

The group analyzed state-level numbers on behalf of McClatchy, and found that states such as South Carolina had outsized cash sales during the first quarter of 2014.

Forty percent of South Carolina home sales were all-cash during the first quarter. Cash sales in the state were 37 percent of home sales in all of 2012 and 34 percent last year.

"It's a lifestyle choice," David Crowell, manager of Mortgage Network's southeastern region, said. "For those who can afford to make that decision, to scratch their chin and decide to pay cash or borrow, that's where we're seeing the shift."

In southern Beaufort County, about two-thirds of Crowell's customers are recent retirees, he said.

He estimates about 25 to 30 percent of this group pay cash for homes in upscale developments such as Berkeley Hall, Hilton Head Plantation and Sea Pines. That's up from about 10 percent before the recession, he said.

"They are increasingly risk averse coming out of a well-publicized recession, even if it didn't affect them directly," he said.

Many are coming to the area with pockets fattened from selling homes in the Midwest or Northeast.

Before the economy's slide, wealthy home buyers moving here would take out a mortgage and use the existing cash surplus for other investments, like country-club memberships or a bundle of stocks.

Now, they'll buy the house flat-out, or at least pay more money up front, Hilton Head Area Association of Realtors president Randy Fix said.

"Every situation is different," Fix said. "I'll tell them, 'If you want to play a little bit, finance 50 percent and use the rest as contingency money.' Others just want to pay now."

He said the association doesn't track the number of area homes purchased with cash.

In northern Beaufort County, fewer high-end properties mean fewer buyers making cash purchases.

But Sam McGowan, a loan officer at Envoy Mortgage Ltd., said he's still seen an increase in communities such as Fripp Island.

Mortgages haven't gone away, however.

Low interest rates are keeping buyers happy, said Dukes, the Beaufort real estate agent.

"I'll have some people telling me they want to lock into cheap money while rates are low," he said.

And thanks to a rebounding real estate market, lenders say they are doing well, too.

"It's marvelous," Crowell, of Mortgage Network, said. "I'm blessed to be in an area where baby boomers will retire for the next 15 years."

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