Cash-Only Purchases Increasing Among Existing Homeowners
A survey of real estate agents conductedrnby Campbell/Inside Mortgage Finance indicates that current homeowners arernincreasingly shopping for their next home with cash. During the period between October 2011 andrnJanuary 2012 the number of existing homeowners using all cash to purchase arnprincipal residence surged from 30.8 percent to 34.1 percent. The use of cash for a home purchase byrninvestors and by first-time homebuyers was virtually unchanged during the samernperiod. </p
The Campbell HousingPulse TrackingrnSurvey said there were several drivers of this cash purchase trend: “mortgagernapproval hassles,” including slow underwriting and tardy appraisals; discountsrnfor cash, and the low returns from bank deposits. These factors make cash purchasesrnadvantageous, the report said, despite the record low mortgage interest rates. Further, current trends suggest that by thernend of this year nearly half of current homeowners will be using only cash tornpurchase homes. </p
HousingPulse survey results forrnJanuary transactions suggested that all-cash buyers can get discounts ofrnapproximately 10% because they do not require mortgage contingencies in theirrnoffers. Cash is especially useful forrngetting on distressed properties such as foreclosures or short sales.</p
“Both mortgage rates andrncertificate of deposit rates have been very low for some time now,” saidrnThomas Popik, research director for Campbell Surveys. “But when thernFederal Reserve explicitly said that bank rates will remain low for severalrnmore years, I think a lot of affluent homebuyers just threw in the towel andrndecided to use all cash.”</p
The HousingPulse Distressed PropertyrnIndex (DPI) shows the sale of distressed properties at a level of 46.8 percent</busing a three-month moving average. Thisrnis much higher than the level of distressed sales reported by other sources</bsuch as Radar Logic (23 percent in January) and RealtyTrac (consistently in thern30-34 percent range). This is the 25thrnmonth in a row that the DPI has been above 40%.</p
The Campbell/Inside Mortgage FinancernHousingPulse Tracking Survey involves approximately 2,500 real estate agentsrnnationwide each month and gathers intelligence on home sales and mortgage usagernpatterns.
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