Early last year I posted a piece on the percentage of house sales that were cash transactions – see Cash is King – more than ever.
In that blog post I reported how more properties were purchased for cash in 2011 than in any previous year — an unprecedented 1 in 4 houses being purchased for cash. I also presented a table showing the percentages of cash sales over the previous ten years.
Today cash sales are at an even higher percentage. Would you believe more than 30 percent for 2013 so far? [See the updated the table below.]
Many of the reasons I outlined in the Cash is King post are still valid today, but a big reason we’re seeing more cash transactions has to do with the competitiveness of the marketplace right now. With multiple buyers making offers on the same property being a frequent occurrence today, buyers are striving to make their offer the most appealing to the seller. One of the ways buyers are doing that is by making all cash offers. Compared to offers that entail some sort of financing, cash offers allow for quicker close times as well as waiving of the appraisal. Waiving the appraisal can be particularly appealing to a seller if the multiple-buyer bidding has resulted in an offer price that may be higher than the current appraised value.
Until the market shifts from an extreme Seller’s Market I expect the number of cash offers to continue to increase.
|units sold||for cash||% cash sales|
* partial year
On a somewhat related note, often my clients rhetorically ask, “Where are all these cash buyers getting their cash?” Though I don’t have an answer for that question, I read an interesting piece from The Wall Street Journal today reporting on how more people are utilizing margin loans (loans backed by a borrower’s investments) in order to win bidding wars for houses. It’s an interesting strategy. See the WSJ story here: Using a Margin Loan to Buy a Home