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More Home Sales Are All-Cash Deals
ORLANDO, Fla. – The number of homebuyers paying entirely in cash has surged since the housing downturn while the time it takes to sell a house is shrinking. This trend reveals the changing dynamics of today’s home buyers and sellers.
Academic experts took a closer look at cash buyers and how time-on-market affects sales of residence during the “Changing Dynamics of Recent Home Buyers and Sellers” session last week at the 2012 Realtors Conference and Expo here. “We’ve seen a tremendous increase in cash buyers since the housing downturn that we haven’t seen before in history,” said Lawrence Yun, NAR chief economist. A decade ago, all-cash house purchases made up less than 10% of the market but have increased steadily since 2008 to as much as 30%, he added.
The increase in buyers paying cash for real estate reflected tight lending conditions and an increase in investor sales, which account for the bulk of cash sales, Yun said. Increases in the number of international buyers, who often have financing difficulties when purchasing a house in the United States, also are adding to the rise in cash sales. NAR research shows that 62% of international purchases were all cash. the percentage has continually increased since 2007.
Recent NAR research on down payment sources may offer insights into how cash buyers are receiving funds for home purchases. A 2012 report, for instance, found that 40% of repeat buyers use the proceeds from the sale of their primary residence as a source of down payment, but downsizing boomers often have enough equity left from selling their former residence to pay all cash for their next. Yun also noted that one in 10 buyers relies on proceeds from the sale of stocks or 401(k) disbursements to make a down payment. Those with stable jobs and who saw investment gains in recent years may be using those funds to buy a home outright.
Thomas Springer, professor of Finance and Real Estate at Clemson University, discussed how time-on-market responds to employment changes and varies with shifting market and economic conditions. Springer analyzed market data from more than two dozen metro areas. His findings indicate that, at the property level, time-on-market is a function of property characteristics, price and market factors; however, at market level, time-on-market is a function of local, national and global economic and market factors.
The National Association of Realtors is America’s largest trade association, representing one million members involved in all aspects of the residential and commercial real estate industries.
Published by The Business Journal, Youngstown, Ohio.