According to the Wall Street Journal, buyers in markets around the U.S. are snapping up homes in all-cash deals, betting that prices are at or near bottom and breathing life into some of the nation’s most battered housing markets.
Cash buyers represented more than half of all transactions in the Miami-Fort Lauderdale area last year, according to Zillow.com; in the fourth quarter of 2006, they represented just 13% of deals. Downtown Miami prices rose 15% in 2010 from a year earlier. The percentage of buyers in Phoenix paying cash hit 42% in 2010—more than triple the rate in 2008.
Seattle, on the other hand, has about half as many cash buyers as the area did in 2004 – 16% currently versus 30% in 2004.
According to the National Association of Realtors, 28% of national sales were all-cash transactions last year.
Cash buyers can often command 5% to 10% more off the asking price than a potential buyer using a mortgage. Often sellers prefer cash deals since they close more quickly and avoid risks such as a buyer’s job loss or a bank’s changing its mind.
Nationally, it isn’t clear whether prices have bottomed. The Case-Shiller index of housing prices in 20 cities showed a steep decline in prices until 2009, when they appeared to bottom and began to trend upward. But in the second half of last year, prices began falling again. A Zillow index, meanwhile, never noted the uptick.
Source: The Wall Street Journal, S. Mitra Kalita, February 8, 2011. Graph from the WSJ.