Friday, August 22, 2014

Cash is still king for a large share of homebuyers

Tougher mortgage application standards and slowly rising interest rates aren’t a challenge for a large segment of the housing market.

More than a third of homebuyers these days are paying cash.

And it’s also a large part of the market in North Texas, the latest surveys show.

Cash sales began to account for a greater share of the housing market a few years ago when investors were buying large volumes of previously foreclosed and distressed properties. Back then almost 46 percent of U.S. home purchases were made without financing.

While distressed property buys have fallen, cash purchases still remain relatively high — 34.4 percent in May, according to CoreLogic.

“Nationally, prior to the housing crisis, the cash sales share was 25 percent,” said CoreLogic senior economist Molly Boesel.

More than 10 percent of Dallas-area homes sold go to investors — many of them major national buyers.

In May, 30 percent of Texas home purchases and 29 percent of buys in Dallas-Fort Worth were made with cash, CoreLogic says.

In the D-FW area, the average preowned single-family home goes for more than $250,000 — a lot of money to hand over in one payment.

The MetroTex Association of Realtors says that 21 percent of D-FW second-quarter home sales through the Realtors’ multiple listing service were all cash. In the first quarter it was 27 percent.
Cash sales are even higher around the country in the states with more distressed property sales. And states with lots of retiring baby boomers see a large number of cash transactions.

CoreLogic estimates that more than half of purchases of foreclosed houses are still made with cash. Often these properties go to investors who have accumulated thousands of houses around the country in the last five years.

Only 0.7 percent of Texas homes were in foreclosure in June, one of the lowest rates in the country, according to CoreLogic.

Nationwide, distressed sales accounted for about 12 percent of home purchases in the second quarter, Realtors say.

Longtime Dallas home sales agent Barry Hoffer said Thursday that he doesn’t see that many all-cash purchases, but some buyers keep it as an option.

“Many of my buyers this year are indicating that their offer is not contingent upon credit approval,” said Hoffer, who is with Ebby Halliday Realtors. “This is basically the next best thing to a true cash offer and strengthens my client's offer in the eyes of the seller since the seller does not need to worry about my buyer being able to qualify for a mortgage.

“In a multiple-offer situation, this is a valuable tool.”

He said some sellers will move a cash buyer to the head of the line for contracts on the property.
“I represented a young couple earlier this year who tried to make an offer on a redo property in Lake Highlands,” Hoffer said. “This was a multiple-offer situation, and one of the other buyers was an investor group who wanted to fix the house up to flip.

“Their all-cash offer was accepted even though my client’s offer was tens of thousands of dollars higher.”

Jed Kolko, top economist with Trulia Inc., said cash sales are declining but remain high.
“Investors are still an important part of many local markets,” Kolko said. “Plus, the difficulty in getting a mortgage and other barriers to first-time homeownership have held back some buyers who would rely on mortgage financing.

“The high all-cash share reflects both the continued role of all-cash buyers as well as the relative lack of mortgage-financed buyers.”

By Steve Brown- Dallas News