Cash is King For Home Purchases

RealtyTrac, a leading source for comprehensive housing data, recently released its July 2013 U.S. Residential & Foreclosure Sales Report.  One interesting piece of information contained in the report was the statistic for all-cash purchases:

“All-cash purchases nationwide accounted for 40 percent of all sales of residential property in July, up from 35 percent of all sales in June and up from 31 percent of all sales in July 2012. Among the nation’s 20 largest metro areas, those with the biggest month-over-month jumps in cash sales share were Dallas (up 82 percent), St. Louis (up 66 percent), Los Angeles (up 32 percent), Riverside-San Bernardino in Southern California (up 26 percent), Seattle (up 21 percent), and Phoenix (up 21 percent).”

Daren Blomquest, vice president at RealtyTrac, provides the following as an explanation for this increase in all-cash purchases,

‘Low inventory of homes available for sale is proving to be a double-edged sword in many local housing markets that have bounced back quickly from the real estate slump,’ said Daren Blomquist, vice president at RealtyTrac. ‘Home prices are accelerating rapidly in these markets thanks to the combination of low supply and strong demand. However, counter to the national trend, sales volume in these markets is down even as the percentage of cash sales rises, indicating there is still strong demand but that buyers who need financing to purchase are increasingly left out in the cold.

‘The recent uptick in interest rates could also be contributing to a higher percentage of cash purchases as some non-cash buyers can no longer afford to buy, particularly in high-priced markets,’ Blomquist added.”

In addition to Mr. Blomquist’s observations, the uptick in all-cash purchases is also likely due to investors trying to seek out deals in the market while avoiding appraisal and other lender contingencies. Purchasing property for rental is an increasingly attractive option as the rental market continues to be strong and will only benefit from the increasing interest rates.  Real estate seems to be a tempting place for investors to park some cash at the current moment.

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