From the WSJ via Calculated Risk – an excerpt on cash buyers:
Residential real estate has been slower to bounce back than stocks, but the presence of apparent bargains is luring in newly confident buyers.
Richard Stoker, a retired sales executive, recently plunked down cash for two condominiums in Miami Beach, and plans to close on one more in coming days. He loves the complex’s ocean views, four swimming pools and activities such as yoga and Pilates.
But what also motivated the purchase, said the 73-year-old, was that “the prices were just irresistible. Florida’s been hit pretty hard.” To pay the $1.8 million, $1.2 million and $1 million prices on the condos, Mr. Stoker and his wife, Jane, cashed out of some financial investments and sold a Roy Lichtenstein painting and an Alexander Calder mobile.
Mr. Stoker could have taken out mortgages, but decided to pay cash. “It was a good time to lighten up in the art market and take on real estate at a favorable price,” he said.
The Stokers have a home in Potomac, Md., but spend most of the year in Florida. Mr. Stoker doesn’t plan to rent out any of his new properties, saying he and his wife will live in one with two dogs, his son might live in another and the third will house an older dog and guests.
The harder a market has been hit, say economists, the higher the percentage of cash deals. Last summer, piano teacher Virginia Hall-Busch told a real-estate agent she met through the Rotary Club to keep her posted on deals on historic houses in Stone Mountain, Ga.
A few days later, Ms. Hall-Busch, 62, got a call about a 1918 bungalow with three bedrooms and one bathroom listed for “short sale,” which in the real-estate world means at a price lower than what’s owed on it. The home had been on the market for $159,000, then dropped to $129,000 and then to $79,900.
“I offered them 50,” she said. “I figured, it wasn’t like I needed a place to live. I can afford to be a little cocky here.”
Ms. Hall-Busch closed in October for $52,500 and began renovations within weeks.
“When you have a bad economy, it’s hard on lots of people,” she said. “But right now if you’ve got the money to put down on a house, long term it’s going to be good thing.”
I would speculate that most cash buyers are investors. Just shows you how weak final demand (people buying houses to live in them) is. Until final demand comes back prices have nowhere to go but down.
Welcome Basho!
Hang around for a while, and you’ll see how strong demand is around our neck of the woods.
True, it’ll probably take lower prices before it’ll become obvious to everyone, but demand is fine – there are lots of people in North SD County Coastal who are ready, willing, and able to buy a house.
In the article they noted that Zillow’s index didn’t track the same as C-S:
Nationally, it isn’t clear whether prices have bottomed. The Case-Shiller index of housing prices in 20 cities showed a steep decline in prices until 2009, when they appeared to bottom and began to trend upward. But in the second half of last year, prices began falling again. A Zillow index, meanwhile, never noted the uptick.
Who knows about the accuracy of any of these indicies, or what they are actually counting.
It looked like the graphs included were from December, judging by Miami’s. Here are the SD counts from the MLS:
Detached and Attached Cash Buys:
Dec. ’10: 724/2,877 = 25.2%
All 2010: 8,491/33,287 = 25.5%
Detached-Only Cash Buys:
Dec. ’10: 346/1,887 = 18.3%
All 2010: 3,926/20,999 = 18.7%
Pretty consistent ratios, but they reported 23.1% in their graph. If they are pulling from the tax rolls, they are picking up less? Who knows.
I could afford to buy with cash at $50k too! But let us be realistic. In San Diego county, even if you’re buying a SFR in Barrio Logan, the average San Diego resident requires a mortgage. The top 5% earners and investors will always be able to buy with cash.
When you buy a condo FOR YOUR DOG, that’s when you know housing prices have bottomed, IMHO.
Don’t forget it’s a $1 million condo for your dog. I guess that dog must be friends with Leona Helmsley’s dog.
I don’t know much about San Diego real estate, I’m in the Seattle area. My point was that a lot of people buying houses to flip doesn’t make for a stable market. These houses have just been moved from visible inventory to shadow inventory. If the investors are rehabbing the houses, they will be back on the market in short order. If the investors are just waiting for prices to go up, I would expect the houses to come back on the market once they get sick of forking out 2-4% a year to carry the real estate. In my opinion, investors get sick of negative carry investments real quick.
Good point, Basho. Which means that right now we’re seeing a portion of those flippers purchases from moneths ago being sold. As long as the new purchases for flipping = sales of flippers, then the shadow inventory won’t actually grow.
Aztec, I think you need to look at the graphs that were posted…