43% of 1Q 2014 home buyers paid cash

[REWahoo]

I was surprised by this statistic. Far more all-cash home purchases going on than I would have thought:

All-cash purchases accounted for almost 43% of all sales of residential property in the first quarter of 2014, up from almost 38% in the previous quarter and 19% in the first quarter of 2013...

So who does have the money to buy a home outright? Wealthy Americans and downsizing empty nesters make some of these all-cash deals, he says. Investors who are eager to make a profit by buying low and renting those properties — or flipping them — also drive up the number of all-cash deals...

No surprises on the top all cash markets:

The top five markets for cash sales were in Florida, which experienced one of the biggest property crashes after the 2008 recession: Cape Coral-Fort Myers (74%), Miami (67%), Sarasota (65%), Palm Bay (64%), and Lakeland (62%). Other major metro areas where over half of all property sales were done in cash included New York (57%), Columbia, S.C., (56%), Memphis, Tenn. (55%), Detroit, Mich. (53%), Atlanta (53%) and Las Vegas (52%).

43% of 2014 home buyers paid all cash - MarketWatch

 

[aja8888]

Yep,,we bought our investment house in 2011 and our downsized "retirement" house in 2013 with cash.

One thing a cash purchase does is it makes the closing with the escrow company go very quickly. The other thing it does is carve out the aggravation of having to deal with a lender.

 

[WannabeRetired]

One thing a cash purchase does is it makes the closing with the escrow company go very quickly. The other thing it does is carve out the aggravation of having to deal with a lender.

Yes, getting rid of those two headaches is very nice.

Interesting statistics. I'm surprised that the percentage was that high.

 

[RockyMtn]

Paid cash for a house last week so guess I'll be in the second quarter numbers. Will pay cash for the remodel as well. That should be it for me...other than selling the other two houses we own.

No more mortgages!

 

[Pleeplus]

Wow....43% really surprises me. I would expect to see results like that from this forum especially those in downsizing mode but not for the rest of the population. According to the link below the average American family has $3800 in savings and $35000 saved for retirement. I guess the average American family wasn't purchasing a house during Q1 as they surely would not have been paying cash (IMO).

http://www.statisticbrain.com/american-family-financial-statistics/

 

[CaliforniaMan]

The cash percentage may be skewed a little by people taking out 1st or 2nd mortgages on an existing property that they own outright or mostly paid up. I know two people who did that, one took out a mortgage on their home to buy a rental property cash. It was faster and cheaper for them to do it that way and they got a better price on the property they were buying.

 

[rodi]

I know the details of two real estate transactions that closed in the past few weeks - both all cash.
The first was someone relocating back to San Diego to care of an aging parent. The buyer was limited in price because she was over 55 and wanted to transfer her prop 13 tax rate from her previous house - which you can do if you're "downsizing" - she sold her previous house - and couldn't spend a penny extra. She paid all the closing costs of the seller to get it at the price that qualified. (She was offering under market.) Doing it all cash allowed her have an easy close and let the seller feel comfortable with the transaction.

The other was an estate sale - investors paid 999,999 for a tear down in a coastal community. Paying cash got it past the probate court easier than if the transaction had gone through financing.

Both deals closed in less than two weeks from accepted offer.

 

[robnplunder]

A Chinese-American friend of mine asserts that rich people in China are buying up real estate in US, always with cash (illegally moved out of China). Some of them don't even check out their new RE in person andy buy by checking things on-line.

 

[zedd]

We are looking to buy for cash. Even so far as to be making renovations paying cash

 

[haha]

Many cash buyers are not looking or a home, they are seeking rentals. And a good number of these in coastal communities anyway are foreign, trying to get some of their money offshore.

Ha

 

[FIREd]

I was surprised at how many cash offers there were in an expensive market like San Francisco. I just don't feel like freeing up $1M in capital just to compete for a 1-bedroom condo. We are pretty much priced out at this point.

 

[tryan]

Last flip I did was cash buy and cash sell .... did carry paper on 1/3 of the price. But no banks involved. Had 3 full price offers fail to get approved by the stingy banks. The bankers don't realize the problems they create!

 

[haha]

Last flip I did was cash buy and cash sell .... did carry paper on 1/3 of the price. But no banks involved. Had 3 full price offers fail to get approved by the stingy banks. The bankers don't realize the problems they create!

I would say that they see these as someone else's problems, and don't care. Very hard to imagine that a banker who is still breathing would not realize something this fundamental.

Ha

 

[robnplunder]

I was surprised at how many cash offers there were in an expensive market like San Francisco.

Likely, money from China ...

 

[zedd]

Likely, money from China ...

Makes sense. We buy their t-shirts and they buy our debt and realestate. Very wise.

 

[robnplunder]

Makes sense. We buy their t-shirts and they buy our debt and realestate. Very wise.

Yeah, I am not going to worry about US-China trade deficit as long as $ is flowing into US. However, it does create house bubble and we all know how the last one ended.

 

[HFWR]

Hedge funds have been big buyers as well.

 

[ziggy29]

We wound up selling our last house to an investor group for cash a month ago. It was a lower offer than we might have had otherwise, but we had one offer fall through because of a survey discrepancy and anyone who needed financing would require us to tear down or massively redesign the garage at our (considerable) expense. And we closed in about 10 days. Who knows how much longer it would have taken to get another "market" offer, and then deal with financing, demands to repair stuff and help with closing costs, not to mention about $400 a month in lost cash flow to taxes, insurance and utilities while it stayed on the market.

 

[tryan]

Very hard to imagine that a banker who is still breathing would not realize something this fundamental.

Agree .... to make matters worse ... all three rejected buyers were first time home buyers. Not a good sign ... the banks can't get out of thier own way.

 

[Another Reader]

It's not the banks as much as it is Freddie and Fannie, the buyers of 90 percent of mortgages today. If the bank doesn't follow their rules, the bank gets the loan back.

 

[mpeirce]

A Chinese-American friend of mine asserts that rich people in China are buying up real estate in US, always with cash

There is apparently a similar dynamic driving real estate in south florida - people from south and central america moving money into a safe haven and paying for condos with cash.

 

[hs2inparadise]

Just scanned the responses, so forgive me if this is a repeat, but I would bet that most of that 43% is not individuals, but Wall Street investment funds. Billions have been pooled to buy rentals in depressed markets (Phoenix and Las Vegas come to mind).

http://www.forbes.com/sites/morganb...s-to-housing-boom-is-a-new-bubble-on-the-way/

 

[MichaelB]

Cash sales are high, but I think some of the data reported in the Marketwatch article is bad.

All-cash purchases accounted for almost 43% of all sales of residential property in the first quarter of 2014, up from almost 38% in the previous quarter and 19% in the first quarter of 2013, according to data released Thursday from real-estate data firm RealtyTrac.

The blog Calculated Risk reports weekly on housing and is a treasure trove of data and analysis. Their latest update on cash and distressed sales (here) shows cash sales are more than 40% of the total in Florida and Nevada but elsewhere are lower, so total cash sales in the US are likely to be in the 35% - 40% range. The data shows it has been declining steadily for over 2 years, so the comment "up from almost 38% in the previous quarter" is suspect and I believe the last time it was 19% was in the early part of last decade ('00 - '04).

 

[jebmke]

Hedge funds have been big buyers as well.

Right, they will lever things up but not secured to the individual properties. Would probably register as cash buyers.

Not sure how foreclosures would be registered. It is considered a sale by the owner to the bank. Might be excluded.

 

[LongPrime]

US still has a soft economy. I'd wager that household formation is low too. Marriiages relative low with our children. Low birthrates among US citizens.