Are Cash Sales Creating a Dangerous Mirage? Home prices and home sales have been rising over the past few years, pointing to a recovery in the housing market, but RealtyTrac warns that what we are seeing may not be a true recovery but instead a mirage created by investors—a dangerous mirage that could lead to trouble in the years to come. Cash purchases made up nearly half of home sales across the nation in September, according to RealtyTrac’s data. A Goldman Sachs study puts the number at 57 percent. “All-cash is driving up home sales nationwide, which looks good on paper,” RealtyTrac said in its most recent Foreclosure News Report. Cash buyers tend to fall into one of four categories: institutional investors, “rich people,” retirees, and foreign buyers, according to RealtyTrac. The National Association of Realtors recently reported investors are making up 35 percent of cash deals, and retirees are making up another 12 percent. “The outsized presence of deep-pocketed Wall Street investors is creating a paradox in the housing recovery,” RealtyTrac said. “A housing boom is taking place alongside a plunging rate of homeownership.” The current trend of institutional investors and foreign buyers snapping up properties and turning them around for profits is not a sustainable one, according to RealtyTrac. In fact, the company compares today’s trend to the last housing boom, noting, “Then as now, market watchers shrugged off warnings of an unsustainable housing bubble, caused in part by speculators driving up prices and chasing short-term profits.” Metros with the greatest percentage of cash purchases in September included Miami, where 69 percent of home purchases were made with all-cash, as well as Tampa, Jacksonville, and Las Vegas, where about 62 percent of purchases were made in cash. - DS News, Dec 3, 2013
Posted on: Fri, 17 Jan 2014 16:00:00 +0000
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