Thanks to the several people who sent in links to the Realty Trac story yesterday about cash buyers accounting for 43% of homes sales in the first quarter of 2014 – and some areas were 50% to 60% cash:
http://www.cnbc.com/id/101654929
Of the 1Q14 detached-home sales in San Diego County, 21% of them were cash buys, and NSDCC had 28% cash sales.
Who and why?
A. People are sick of payments, especially baby boomers who think about taking a 30-year mortgage and having payments into their 80s or 90s.
B. People are making cash offers to win bidding wars.
C. Investors are buying rental properties for long-term hold, and get a better return than if they left money in the bank.
D. Parents are buying houses for their kids.
E. Foreigners are flush after the exchange rate.
F. Getting a mortgage can be messy.
G. Paying cash is sexy.
Get used to Big Cash floating around the real estate market – it’s here to stay, and if the stock market stumbles, then we should see even more money flow into real estate. It’s like everything else the boomers have screwed up for future generations – we elbow our way in front of younger folks, run up the prices, and then hope the kids can finance the rest.
“It’s like everything else the boomers have screwed up for future generations – we elbow our way in front of younger folks, run up the prices, and then hope the kids can finance the rest.”
Nice! I agree, and I’m a boomer! (1960)
Paragon published a study of the San Francisco market. Many of the so-called cash offers are not really cash offers.
And while 26 percent of their buyers’ offers were presented as “all cash,” many of those offers were written that way “solely for strategic reasons to get their offers accepted” and “many of these buyers end up getting loans either before or immediately after close of escrow.”
http://www.socketsite.com/archives/2014/04/sf_sellers_are_moving_out_and_behind_a_couple_of_buyer.html
When underwriting standards ease from the current ridiculously tough level we will see more people get a mortgage. Heck, even Mark Zuckerberg has a mortgage! Free money, why not?
Seems like the last couple of years or so, the “cash” offer as nothing more than a bidding tactic (get an accepted offer then get financing) is getting more common.
I’m self employed and have used my own cash to close out of sheer convenience and then leisurely shopped for the best mortgage product post close.
Regardless of whether these “cash buyers” actually have the dosh to throw down long term, short term, or just the solid credit worthiness to risk earnest money, I fail to see the systemic bearishness.
Blaming the squeeze generation for everything is seriously Lame JTR
I also seriously doubt Boomers are buying the homes in CV or San Fran at this point anyway.
Jim, re: #1 (A) I’m a baby boomer and I couldn’t care less if I have a 30-year mortgage. What I do care about is that I got a mortgage (w/ 20% DP) @ 4% fixed back in November, 2010.
What’s not to love? I sleep well at night, and I have money for investments (that have a much better return than 4%). It’s a win-win for me. The only thing I don’t like is the mortgage is with US Bank. (It was sold to them on the first day it closed–before I even moved in! But I count myself lucky, at least it’s not with (dreaded) Bank of America…
Most of the reports over the last few days have been “shocked” at the record number of cash buyers in the market. Nothing surprising here. This has been the juice of the housing recovery going back to 2008. Latin Americans are heavily purchasing in places like Miami while buyers from China are heavily focused in on California. What did stand out to me was a quote from Meyers Research regarding the Irvine housing market:
“(CNN Money) Miami, New York, Boston and coastal California cities are attracting a lot of foreign buyers who are paying in all cash, according to Jeff Meyers, founder of Meyers Research.
In Miami, Latin Americans are putting down deposits of 50% or more on apartments in the early stages of development, enabling builders to self-finance the rest of the building or leverage bank loans at attractive rates. The buyer then pays the balance in cash at the time of occupancy.
In California, Chinese nationals and immigrants are “parking their cash in single-family homes,” said Meyers.
In Irvine, Calif., for example, 80% of sales over the past year were to Chinese buyers, he said.”
This is a massive amount of targeted home purchasing in one city. I’ve had a few contacts that sell homes in the Orange County market telling me that 7 out of 10 purchases were going to Chinese buyers, all with cash offers. These reports would come in every few months or so but interesting to see this coincide with the report above. We already know that over 30 percent of all purchases in California are going to investors but 80 percent in one city? That would certainly change the dynamics of the market. Irvine is no small city with 230,000+ people living in the city.
http://www.doctorhousingbubble.com/cash-buyers-reach-record-level-of-all-home-purchases-at-over-42-percent-80-percent-of-all-sales-over-past-year-in-irvine-went-to-buyers-from-china/
“80% of Irvine sales going to foreign investors” does not pass the smell test. Until I see some hard numbers other than one guy making soundbites to reporters I won’t believe it.
It is more than rumor.
In CV, it is 70% at a certain new-home tract.