I would be willing to bet special financing is distorting the numbers. There are companies that front borrowers cash to help them compete with real cash buyers.
Cash buyers make up almost a third of U.S. home purchases
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Re: Cash buyers make up almost a third of U.S. home purchases
#12Earlier quoted context omitted.
Maybe. But some are homeowners who sold a property and use the proceeds to pay for another one, in which case there's not much change in net demand. This surely beats their taking out a low interest loan to speculate on an investment property.
> But some are homeowners who sold a property and use the proceeds to pay for another one, in which case there's not much change in net demand. That's not a cash offer unless the property being purchased is far lower in purchase price than the profit off the sale of the first home (i.e. due to downsizing, or moving from a much higher to much lower cost area), in which case it is a different housing submarket, and the…
If I understand correctly, what you're saying is that selling for $200k usually means you had $120k left on the mortgage, so you only get $80k and can't make a cash offer for a new $200k home.
Re: Cash buyers make up almost a third of U.S. home purchases
#13Earlier quoted context omitted.
Maybe. But some are homeowners who sold a property and use the proceeds to pay for another one, in which case there's not much change in net demand. This surely beats their taking out a low interest loan to speculate on an investment property.
> But some are homeowners who sold a property and use the proceeds to pay for another one, in which case there's not much change in net demand. That's not a cash offer unless the property being purchased is far lower in purchase price than the profit off the sale of the first home (i.e. due to downsizing, or moving from a much higher to much lower cost area), in which case it is a different housing submarket, and the…
Or the buyer is a long-time homeowner who has largely paid off the mortgage on their original residence, or at least paid it down such that inflation + payments has increased their home equity to near the purchase price of a new home.
This includes nearly all senior citizen purchases, but it's also a surprising number of 40/50-something wage earners who bought in HCOL areas around 2010, saw their $800K homes appreciate to about $2M, have paid the mortgage down to about $450K (or paid it off entirely, using stock price appreciation), and also have a couple million in appreciated stocks from saving abundantly during the 00s and 10s and enjoying the stock price appreciation.
Re: Cash buyers make up almost a third of U.S. home purchases
#14I would be willing to bet special financing is distorting the numbers. There are companies that front borrowers cash to help them compete with real cash buyers.
This is part of it. Contingent offers are always less desirable than non-contingent so you make a cash offer if you can even if you immediately refinance.
Re: Cash buyers make up almost a third of U.S. home purchases
#15I would be willing to bet special financing is distorting the numbers. There are companies that front borrowers cash to help them compete with real cash buyers.
I don't think that's a very large market as of yet. But I could be wrong. Hedge funds and other corporate entities are buying up single family homes now. That seems more likely to be pushing more of the trend.
Re: Cash buyers make up almost a third of U.S. home purchases
#16Since this confused me: cash buyer in relation to housing is someone paying the full amount without using a mortgage. They are probably using checks or wire transfers instead of metal briefcases filled with $100 bills.
In Australia actual suitcases of cash are allowed and sometimes used for buying houses because Lawyers, Realtors, and Accountants have zero accountability to report anything suspicious to anyone. "Anti Money Laundering" laws to stop that happening never managed to actually be passed into legislation in Australia [0] despite many "attempts" since 2006 (the politicians forming discussion groups of committees for re-rev…
That's good, people should be able to do that. If people want to exchange cash for items of value there should be nothing stopping them. Police should just investigate crimes and stop laying totalitarian dragnets and checkpoints for everything people do that in some cases might also be done by a criminal.
Re: Cash buyers make up almost a third of U.S. home purchases
#17> Why are there so many cash buyers Simple, investors discovered that purchasing homes in a market limiting new construction, they can change what ever rent they want. That provides a larger return than what the markets provide. The only way out of this is if an entity owns say over 5 homes for rental income, property taxes should be increased on these homes to say 100% of value per year. It doubles with each 10 home…
> they can change what ever rent they want
They can’t - rent prices are set by the market
Also in a high interest risk free rate of return is more appealing
Why buy a house that can break down, not rent when you can park it in a bank
Re: Cash buyers make up almost a third of U.S. home purchases
#18Since this confused me: cash buyer in relation to housing is someone paying the full amount without using a mortgage. They are probably using checks or wire transfers instead of metal briefcases filled with $100 bills.
It's slightly confusing because when a lot people (at least in CA) talk about competing with cash buyers it just means the deal isn't contingent on a mortgage. They may very well be mortgaging the property, but the deal isn't going to fall through because they can't secure financing.
Re: Cash buyers make up almost a third of U.S. home purchases
#19> Why are there so many cash buyers Simple, investors discovered that purchasing homes in a market limiting new construction, they can change what ever rent they want. That provides a larger return than what the markets provide. The only way out of this is if an entity owns say over 5 homes for rental income, property taxes should be increased on these homes to say 100% of value per year. It doubles with each 10 home…
> they can change what ever rent they want They can’t - rent prices are set by the market Also in a high interest risk free rate of return is more appealing Why buy a house that can break down, not rent when you can park it in a bank
Own enough homes in an area and you can control the market.
The Econ 101 supply/demand theory does not work in the highly regulated (mostly to slow down building) housing market.
People pay an irrational amount of income on rent all the time.
Re: Cash buyers make up almost a third of U.S. home purchases
#20Since this confused me: cash buyer in relation to housing is someone paying the full amount without using a mortgage. They are probably using checks or wire transfers instead of metal briefcases filled with $100 bills.
It's slightly confusing because when a lot people (at least in CA) talk about competing with cash buyers it just means the deal isn't contingent on a mortgage. They may very well be mortgaging the property, but the deal isn't going to fall through because they can't secure financing.
Kind of. It means that the person making the offer already has the cash - if it’s a corporate/business purchase that cash may indeed come in the form of financing elsewhere, however the cash is already available so by definition isn’t secured by ownership of your property and so is not a “mortgage”. In a practical sense it likely means something like failing to make a repayment doesn’t automatically give possession of the property they bought.
All that said, in the Bay Area at least a cash offer from an individual means just that: the person buying it likely just sold a ton of stock, or their startup got bought, etc. I personally know people have done that (in some cases out of necessity: sellers favour short closing and no financing issues)