Cash buyers are stepping into the housing market with increasing frequency. With home prices down nationally and opportunities to find great deals in just about any market, those who are able to pay cash are snatching up more and more homes. According to a recent story in the Wall Street Jounal, cash buyers are seeing bargain opportunities and have made a noticeable difference in the statistics.
“Nationally, 28% of sales were all-cash transactions last year, according to the National Association of Realtors. The rate was 14% in October 2008, when the trade group began tracking the measure,” the story in the Wall Street Journal noted. Some localized markets saw even larger increases.
In Miami-Ft. Lauderdale, over 50% of all home purchases were all-cash deals in 2010. Back in 2006, only 13% of all purchases were completed without a mortgage loan. Prices in that area in 2010 went up, perhaps indicating that the bottom of the market is behind them. In Phoenix, 42% of all deals were in cash, according to Raymond James equity research division.
Cash buyers can often command lower prices than traditional buyers because there is little risk of the deal falling through and the entire transaction can occur much more quickly than when a mortgage loan is involved. Tighter lending restrictions have made it more and more difficult for some buyers to secure a loan, causing some sellers to wait or see their deals fall through completely due to buyers being unable to find financing.
While these cash buyers obviously do not directly benefit mortgage banks such as Mission Mortgage, by jumping into the market now, cash buyers seem to be propping up the market and increasing overall activity. By stepping in now, these buyers are helping the overall health of the housing market, which in turn benefits all of us involved. For instance, when a buyer pays cash to purchase a home, the seller in that transaction can now pay off their existing loan (if they have one), and make a home purchase of their own and they may elect to take out a mortgage. Thus, any activity in the market is seen as positive for lenders. It does eliminate a certain amount of inventory from buyers who plan to finance, but with plenty of resale inventory on the ground, as well as some new home construction, there are still plenty of opportunities for good lenders to find willing and able borrowers.
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