In case you have not heard, you better have cash (either your own or borrowed or begged) to get into the US housing market. This is a real home buying turnaround from the past when homeowners who generally lived in their houses financed through bank loans or mortgages.
Today, a steadily increasing number of homes are cash-only, as reported on the front page of the weekend New York Times.
Who’s to blame? Investors.
“All-cash buyers, typically investors eager to renovate and quickly resell or rent out homes, are making it more difficult for first-time buyers,” the newspaper reported of the national trend.
Flipping has become an “in” pursuit.
More homes in California were flipped in the past year than any time since 2005, the newspaper reported.
This is the case not just in always-strange-behaving California but in many other places in the country (not everywhere, of course). Other markets where all-cash is becoming king include New York City, Boston, San Francisco, Miami and Phoenix.
In such areas, sellers are often looking at offers on homes only minutes after the news gets out via a realtor or even word-of-mouth. Homes selling for more than the asking price are not uncommon.
The market is so active that many realtors liken it to an “insane asylum.” No surprise there when you consider that only a year ago, buyers did not want a deal, they wanted a steal. Homes then were being listed at prices lower than originally paid.
So those buyers who in the past have been patiently saving their money to plunk a down payment on a home are increasingly out of luck. But with small time investors, as well as major institutions getting into the act, the owner occupants are clearly finding it harder than ever to buy a home.
But what about investors?
What does this mean to them?
The obvious lesson is that they better come up with cash for these times. And for those who don’t have it readily available, the answer is to find it somewhere else. That may involve friends or relatives or a wife or husband who socks it away for a rainy day.
Of course, the investment market is seldom stagnant.
Few doubt these days that the market in general has hit bottom. So the rising demand for available homes is certain to be met by new building, which will make reduce the market’s sustainability.
So this blog is a warning flag. Don’t casually or carelessly get into the now-standard bidding wars, whether your fellow buyers are individuals such as yourself or even more likely, large corporations often willing to bid well above going rates. Study your particular market with even more skepticism than usual (remember that not all markets are saturated). And be extra careful of what you buy. ###