More Transactions Are All Cash in Latest Reports
Walt Molony, a spokesman for the National Association of Realtors®, says that the association’s estimate of the share of the home sales market made up by all-cash buyers is lower than other estimates, but that it’s still at an all-time high. About 19 percent of REALTOR® respondents reported a sale to an investor in November 2013. The share of investors has generally stayed at about this level since 2008. Cash sales account for about 70 percent of purchases made by investors,
Molony says that investors make up 32% of all-cash buyers (70% of all investors pay cash), up from 31% in October and 30% in November 2012, while retirees who have built up equity in their homes or paid off their mortgages account for around 12%. The rest include vacation-home buyers and foreign buyers.
All-cash purchases accounted for 42% of all sales of residential property in November 2013, up from 39% during the previous month, according to data from real-estate data firm RealtyTrac released earlier this month. Biggest month-over-month jumps in the number of all-cash sales, according to RealtyTrac, included Florida (63%), Georgia and Nevada (both 51%), South Carolina (50%) and Michigan (49%).
While cash buys help explain the surge in home sales over the past year, some experts say it’s an unsustainable trend — and one that should be greeted with caution. “The rise in cash sales is not a good long-term trend for the housing market,” Daren Blomquist of RealtyTrac says. Although RealtyTrac doesn’t identify who has cash-in-hand, experts say wealthy Americans and downsizing retirees account for some of these all-cash deals. Investors who are keen to make a profit by buying low and renting those properties — or flipping them — also drive up the number of all-cash deals, he says. None of these three groups — flippers, retirees and the wealthy — are big enough to sustain the market in the long run, he says. If it remains dominant in the long run, cash buying “will have a chilling effect on home sales and prices,” Blomquist says.
Our Elite Team at RE/MAX Peak Properties has represented several cash buyers of Flagstaff homes this year.
Economists’ Outlook.- December 31
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