Investors, foreigners cashing in on market
MIAMI – April 12, 2011 – With affordability at an all-time high, the number of investors and international buyers taking advantage of bargains has reached a record number in all-cash purchases – and some experts predict that number will only grow higher.
A record 33 percent of existing-home sales were made to cash buyers in February, the National Association of Realtors® (NAR) recently reported. The proportion of cash deals could hit 40 percent by the end of this year, predicts Thomas Popik, research director for Campbell Communications in Washington, which conducts monthly surveys of 3,000 real estate brokers.
“Lenders have only been willing to lend to the cream of the crop in terms of credit scores,” says Walter Molony, an NAR spokesman. “As a result, you’re seeing a depressed level of traditional buyers.”
But it’s not just investors moving in: Many of these cash deals are also coming from a growing number of international buyers. About 55 percent of international buyers paid cash for their U.S. homes, according to an April 2010 report by NAR.
The cash buyer advantage?
Cities where about half of all purchases were done with cash include Detroit, Miami, Las Vegas, and Phoenix, in which prices have dropped considerably and foreclosure rates remain high, says Oliver Chang, a housing market analyst with Morgan Stanley.
Short sales and foreclosures accounted for 59 percent of last year’s cash sales, according to a report by Morgan Stanley.
“You buy the house at a discount with cash. Then you flip it almost immediately to the first-time homebuyer who’s using a mortgage, simply because they were not able to buy at the foreclosure sale,” Chang says.
Lenders increasingly reject mortgage applications for foreclosed properties because appraisals are often too far below the agreed-upon price or the transactions take too long to close, says Popik. With tightened lending standards, cash purchases can provide buyers with more leverage and allow buyers to close properties more quickly.
Mike Simmons Troy, a Detroit real estate investor, says that if a house is listed at $40,000 and a buyer offers $35,000 cash, “nine times out of 10, the bank will take the cash.”
Source: “Cashing in on Bargains,” Detroit Free Press (April 10, 2011)
© Copyright 2011 INFORMATION, INC. Bethesda, MD (301) 215-4688
A record 33 percent of existing-home sales were made to cash buyers in February, the National Association of Realtors® (NAR) recently reported. The proportion of cash deals could hit 40 percent by the end of this year, predicts Thomas Popik, research director for Campbell Communications in Washington, which conducts monthly surveys of 3,000 real estate brokers.
“Lenders have only been willing to lend to the cream of the crop in terms of credit scores,” says Walter Molony, an NAR spokesman. “As a result, you’re seeing a depressed level of traditional buyers.”
But it’s not just investors moving in: Many of these cash deals are also coming from a growing number of international buyers. About 55 percent of international buyers paid cash for their U.S. homes, according to an April 2010 report by NAR.
The cash buyer advantage?
Cities where about half of all purchases were done with cash include Detroit, Miami, Las Vegas, and Phoenix, in which prices have dropped considerably and foreclosure rates remain high, says Oliver Chang, a housing market analyst with Morgan Stanley.
Short sales and foreclosures accounted for 59 percent of last year’s cash sales, according to a report by Morgan Stanley.
“You buy the house at a discount with cash. Then you flip it almost immediately to the first-time homebuyer who’s using a mortgage, simply because they were not able to buy at the foreclosure sale,” Chang says.
Lenders increasingly reject mortgage applications for foreclosed properties because appraisals are often too far below the agreed-upon price or the transactions take too long to close, says Popik. With tightened lending standards, cash purchases can provide buyers with more leverage and allow buyers to close properties more quickly.
Mike Simmons Troy, a Detroit real estate investor, says that if a house is listed at $40,000 and a buyer offers $35,000 cash, “nine times out of 10, the bank will take the cash.”
Source: “Cashing in on Bargains,” Detroit Free Press (April 10, 2011)
© Copyright 2011 INFORMATION, INC. Bethesda, MD (301) 215-4688
Comment
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Comment by Damian Czajka on April 13, 2011 at 7:10pm -
There is a lot of land available in and around Las Vegas. However, to build a house it will cost you $80+ per sq. ft. plus the cost of land. You can buy a nice, existing house for $60 per sq. ft.
That is why the land lost a lot of value, we have nice 5 acre parcels in a very good area that used to cost $1,200,000 to $1,600,000. You can buy them now for $150,000 or less.
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Comment by Marietta Lopshire on April 13, 2011 at 6:28pm -
There is only so much land out there, the question is- 'Do you want a peice of it?'
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Comment by Damian Czajka on April 13, 2011 at 3:25pm
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Yes, our markets are very similar
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Comment by Sherayn Allen on April 13, 2011 at 3:19pm -
exactly the way it goes here in Phoenix; I have buyers with loans getting deals snatched out from under them constantly buy the cash buyers..
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Comment by Damian Czajka on April 13, 2011 at 3:11pm
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Great article.
In Las Vegas cash transactions accounted for over 50% in 2010, this number is up this year. About 80% of all transactions are distressed properties. There is a loan program available for foreign nationals.
Properties are priced (and appraised) 50% to 65% below their price in 2006.
Investors paying cash gain 8 to 14% on cash, or up to 23% if they finance the purchase, all this after paying 10% property management fee.
Check out searchLVhomes.com for some actual, current deals.
A lot of investors buy several properties and use them as an additional source of income when they retire.
Damian Czajka
Wynn Realty Group
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Comment by Derek Camunez- DENVER on April 13, 2011 at 11:51am -
Cash is king again...
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Comment by Johnny Gilbert on April 13, 2011 at 11:20am -
This is a great opportunity for Brokers and Agents alike, especially to those that have international affiliations. Great article. Johnny L Gilbert PhD. HomeLife International Realty
NAR News
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