Throughout the past few years, the real estate market has been largely affected by cash buyers and in quite the triumphant way. The industry and the greater economy as a whole would not be in the recovering state that it finds itself in today if it were not for cash deals. CoreLogic reports that corporate balance sheets saw a boost in cash during the recession to the highest levels ever recorded. This, as it turns out, then resulted in a far greater circulation of cash amongst the population now that the recession is largely considered to be over.
In CoreLogics MarketPulse issue for this month, there are specific pieces entitled, Real Estate and the Impact of Cash Sales, Fire Burn and Caldron Bubble, and Recovery, a Long Row to Hoe, which all help to explain how cash sales have soared as of late at all price points throughout the entire country. While when such individuals are able to pay for property in cash has helped both grow and stabilize the real estate markets in all geographies of the United States, there has been a negative factor. Those hoping to trade up to a more valuable residence and those who are first time home buyers are at the mercy of cash buyers superiority. Cash buyers when not purchasing luxury homes for themselves are often often swooping up homes to turn them into income (rental) properties. This only further complicates the difficult home buying process for the first time/trading up buying segment to compete.
What used to be seen as a significant portion of the given market data, homes in the early 2000s saw cash only sales take up roughly 25% of all transactions covered. As the economic recession in 2007 and 2008 commenced the simultaneous downfall of the real estate industry, cash sales began to climb. Essentially, those with the deepest pockets were simply not as money constrained as the majority of the population was. With the dramatic falling of home values, it was thus an opportunistic time to buy. Cash sales slowed around 2010 and a moment of stabilization occurred. However, as of the conclusion of May of 2013, cash sales have been shown to once again climb in popularity to where they now represent 39% of all closings; although this is slightly down from the 40% of total sales they accounted for in May of 2012.
CoreLogic is adamant that if cash sales were taken out of the equation, both sales would be down and price declines would be the norm. As added proof to this claim, the median price for cash sales in the past year alone have increased by a massive 24%. As it turns out, this 24% helped to pull up the overall sales prices for all transactions by 15% over the past twelve months. Ultimately, CoreLogic remains optimistic that despite the rising rates and continuous rise in prices, buyer demand should not subside in the slightest in the near future.
More Information: Mortgage Daily News