Large Share of All-Cash Sales in the Bottom Segment of the Housing Market

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Once again housing is becoming a worthwhile investment for both households and businesses. Many buyers decide to use their saved cash instead of taking out a mortgage loan to purchase homes especially in the bottom segment of the market. This creates greater competition for the buyers who rely on financing.

In 27 out of the top 30 metro areas in the United States, the number of all-cash sales in the bottom segment of the housing market exceeds 33%. The areas with the highest number of all-cash sales exceeding 80% are Tampa, Detroit and Miami. In 20 out of the top 30 metro areas the number of all-cash sales in the bottom segment is over two times higher than in the top segment. Businesses are more likely to engage in such deals. In 11 out of the 30 metros, 90% of homes purchased by business buyers were paid in cash.

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There are several factors contributing to the large share of all-cash sales in the bottom segment of the market. The primary one is the improvement in the housing market which led to higher home values. Businesses and households that saved money during the recent economic crisis are now looking to invest their extra cash. Even though the mortgage rates are still around their historic low, the lending standards have become much tighter and this has had a negative impact on the demand for financing.

The all-cash sales contribute to the improvement in the housing market, but they place even higher hurdles for the first-time home buyers looking to buy an affordable house with little savings. It is harder for them to compete with the all-cash buyers, especially given the low inventory in this segment which continues to fall. Still, it is expected that more home buyers using traditional mortgage financing will enter the market as the economy improves.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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