All-Cash Deals Are Back: Has Housing Hit Bottom?
Consider these stats: Cash buyers represented more than half -- 50 percent -- of all transactions in the troubled Miami-Fort Lauderdale area last year, this according to Zillow.com. Looking back at 2006, cash was king on only 13 percent of deals. That cash was enough infusion to make Miami home prices actually rise 15 percent in 2010 from a year earlier, according to the Miami Downtown Development Authority.
Across the country in "everyone's underwater" Phoenix, the percentage of buyers in Phoenix paying cash hit 42 percent in 2010 -- more than triple the rate in 2008.
Looking at the national numbers, 28 percent of real estate sales were all-cash deals last year, according to the National Association of Realtors. Compare that to a rate of 14 percent in October 2008, which is when the NAR first started tracking the measure.
"The foreclosure rate is super-high here," he says. "The agent I spoke to said something like 8 out of 10 homes are foreclosed or in the pipeline to be foreclosed on."
Sure enough, the Greater Las Vegas Association of Realtors say home sales fell in the market in January, as cash buyers swooped up 51 percent of the homes sold. Over 2,500 single-family homes were sold in January at a median price of $125,000, which is down nearly 20 percent compared to December. Greater Las Vegas Association President Paul Bell told the Las Vegas Sun that most investors are renting the homes. Investors, he says, will keep paying cash as long as lending standards stay tight, foreclosures toss homes into the market, and prices stay low.
Cash buyers often command good deals, as much as 5 percent to 10 percent more off the asking price. Why? Because, say Realtors, the sellers know they can close smoothly and more quickly, and not worry about a last-minute glitch in the appraisal, an underwriter not liking the mortgagees W-2's or credit history. So are all cash offers lowest of the lowballs?
Surprise, surprise: Mohammed Siddiq, a Fort Lauderdale Realtor, says he has started to see bidding wars and slightly increasing prices.
No one yet has declared the bottom of the real estate market. Case-Shiller's 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 then in the second half of last year, prices began falling again. Take us here in Dallas: sales are down 11 percent, but -- go figure -- prices may be up 8 percent from January 2010. Fewer sales, higher home values: Experts at The Real Estate Center at Texas A&M University blame the decrease in sales on last year's First Time Homebuyer's credit, which jacked up sales artificially.
The increase in home values may have come from a flurry of high-end home sales that took place in late December from people wanting to wrap up sales by the end of the year. Good example: Teen idol Kevin Jonas, pictured above with his wife, Danielle, sold his Westlake, Tex., home in late December. The newlyweds were asking $2,200,000 and let the house go for $2 million on December 21!
For more on mortgages and related topics see these AOL Real Estate guides:
- Stop Foreclosure Scammers Before They Scam You
- How to Get a Low Mortgage Rate
- Mortgage Jargon in Simple Terms
- How Much Home Can I Afford?
- How to Buy Foreclosures
- Closing Costs: How Much to Budget
- Guide to Settlement and Escrow