ZipRealty. (http://www.ziprealty.com) analyzed all its transactions from January 2012 through December 2013 and concluded that one of every four real estate transactions closed without financing.
“Upon first glance, it may seem high that a quarter of all ZipRealty home sales closed without financing in 2012 and 2013,” said ZipRealty CEO and President Lanny Baker.
“But based on our own internal analysis and data from the National Association of Realtors, the percentage of all-cash real estate transactions may actually be moderating. Nationwide, the percentage of all-cash real estate transactions reached a five-year high in 2010 at 27%, and the percentage of all-cash property sales has slowly declined or flattened every subsequent year.”
All-cash transactions accounted for 20% of the residential real estate market in 2009, and 25.6% of the market in 2011, NAR reports. According to ZipRealty’s analysis, 26% of all the real estate transactions closed by ZipRealty agents were purchased with cash, while 25% of the homes purchased through ZipRealty agents in 2013 were acquired with cash.
Two important market forces have made all-cash financing more prevalent in the residential real estate market over the past few years, including:
· Increased investor activity in the housing market
· Historically low housing inventory levels
(Note: I reported last summer in the EPJ Daily Alert that certain hedge funds were becoming major players in the housing market and that housing inventories were extremely low.)
“Investors that are backed by institutions have the financial wherewithal to write a check for a home, unlike some consumers right now. And these investors are still active in a quite a few metro areas across the country,” said Van Davis, President of Brokerage Operations for ZipRealty.
Sellers are increasingly seeking all-cash offers due to historically low inventory numbers, which leads to stiff competition between buyers, Davis added. “Low inventory is making cash offers on houses mandatory in some markets for buyers. Many agents have told us anecdotally that some buyers may arrange post-close financing, which do not show as financed deal on the contract for purchase.”
According to the study, the metros with the most real estate purchased with all-cash in 2013 include:
Metro Area
|
% of All-Cash Sales
in 2013 |
Las Vegas
|
48%
|
Orlando
|
43%
|
Chicago
|
33%
|
Richmond, Va.
|
32%
|
Los Angeles
|
29%
|
Of all the metros surveyed by ZipRealty, Greater Chicago housing inventory dropped the most on a year-over-year percentage basis. Inventory declined 25% since Jan. 31, 2013 to approximately 29,300 homes. That compares to the overall inventory in the housing markets tracked by ZipRealty, which declined 7% annually as of Jan. 31.
This "all cash" meme obscuring hedge funds with Fed funny money is troubling. Even normal people with no involvement in the financial industry have picked it up and repeated it to me.
ReplyDeleteWhen I describe to them how individual people are not repeatedly appearing out of thin air and paying more "cash" than the asking price on the house they were looking at, instead of a light going off in their head, out come the excuses.
My favorite is, "It's people from California who sold their house for a lot of money!" And who bought their house for too much? They just go in circles.
It is as if people know in the back of their head that there is a such thing as a housing bubble, the market didn't really clear out after the last one, and they may very well be buying into another one.
"Buy high, sell low," strikes again.
With Chicago property taxes set to double on Jan 1, 2015, I suspect these price increases will be short lived. For reference, tax in the city is about 3% of assessed value, so a $400k condo would have a $12/yr property tax bill.
ReplyDeleteinteresting piece. we always tell buyers that cash is king, but of course most buyers can barely afford a down payment.
ReplyDelete