ORLANDO, Fla. – Nov. 13, 2012 – All-cash buyers have surged since the housing downturn while the typical amount of time it takes to sell a home is shrinking, revealing the changing dynamics of today’s home buyers and sellers.
Academic experts took a closer look at cash buyers and how time-on-market impacts home sales during the “Changing Dynamics of Recent Home Buyers and Sellers” session at the 2012 Realtors® Conference and Expo. Funding for the research was provided by the Realtor University Center for Real Estate Studies.
“We’ve seen a tremendous increase in cash buyers since the housing downturn that we haven’t seen before in history,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR). Yun said a decade ago, cash home purchases were less than 10 percent of the market, but they’ve increased steadily since 2008 – up to 30 percent of sales.
Yun said the increase in cash buyers results from tight lending conditions and an increase in investor sales, which make up the bulk of cash purchases. Increases in the number of international buyers, who often have financing difficulties when purchasing a home in the U.S., are also adding to the cash sale rise; 62 percent of international purchases were all cash, a percentage that has increased since 2007.
Recent NAR research may offer insight into how cash buyers receive funds for home purchases. According the 2012 NAR Home Buyers and Sellers Profile, 40 percent of repeat buyers use proceeds from the sale of their primary residence as a source of down payment, but downsizing boomers may have enough equity left from their home sale to pay all cash for their next purchase. Yun also noted that one in 10 buyers rely on proceeds from the sale of stocks or 401K disbursements for down payments. Those with stable jobs and who had investment gains in recent years may use those cash funds to buy a home outright rather than financing the purchase.
Dr. Grant Ian Thrall, president of the American Real Estate Society, agreed that cash sales have increased dramatically in recent years. Thrall spoke at the session and conducted an in-depth market analysis to gain greater insights into cash buyers.
“Research shows a bias toward cash sales for newer and lower priced homes,” Thrall said. “Many of those sales are occurring within the first 60 days that the home is on the market, and more than half sold within the first 120 days.”
Thomas Springer, professor of Finance and Real Estate at Clemson University, discussed how time-on-market responds to employment changes, and shifting market and economic conditions. Springer analyzed market data from more than two dozen metro areas. His findings indicate that time-on-market is a function of property characteristics, price and market factors for a specific home; however, at market level, time-on-market for an area is a function of local, national and global economic and market factors.
Yun said that tightened inventory conditions also impact time-on-market, which has steadily decreased nationally since the start of the year.
“Tightened inventories in some places mean homes are selling more quickly and reducing time-on-market,” Yun said. “Our research shows that last year, homebuyers saw 10 homes before buying, down from 12 the year before. And more than half of buyers reported that finding the right home was the hardest part of the home search process.”
© 2012 Florida Realtors®
Reprinted with permission. Florida Realtors®. All rights reserved.
PS from JOHN ELWELL - REALTOR: Since I live and work in Zephyrhills, a major retirement center in Florida. many of the sales that I handle are paid for with cash as opposed to getting a mortgage. Many of the smaller homes, condos, or mobile homes that the 55+ set purchases are priced under $100,000. So it is not uncommon for these retirees to just pull into closing with a bank check or wire in hand.
When you take out the financing element, you typically do away with appraisals, surveys, and all of the underwriting & bank paperwork that drags on and on. The title company, home inspectors, and even the surveyors, if requested, can do their work in less than 2 weeks. So 14 day closings are common.
As an aside, so far this year I have had many sales. All but ONE were for cash! Only one was a financed deal on a $265,000 home, and even then the buyers made a down payment of $150,000! So there is cash out there that people want to spend. And who can blame them when bank CD's are paying less than 1%!
The cash strategy doesn't work all the time. An outrageously low cash offer can easily offend a seller, especially one who has an emotional attachment to a house.
Posted by: Brampton Homes for Sale | November 28, 2012 at 08:04 AM