They don't say "cash is king" for nothing - and in residential real estate, nothing could be truer. In a time of unprecedented economic turbulence, the amount of all cash buyers if off the charts. A recent article posted by DoctorHousingBubble.com dissects the trends of home buyers and their preferred method of payment. According to the article, Wall Street investors as well as foreign buyers are dominating the market with all-cash purchases. In 2012, all-cash transactions in southern California hit a record high of 35.8% in December, and last month, that number was mimicked by 35.6%, much higher than historical norms. The article also explains that 31% of these buyers are absentee buyers, meaning they are not planning to live in these homes, and dating back to 2000, the monthly average of absentee buyers was nearly half at 17 percent. The graph above provides a visual description of all-cash transactions in specific markets across the country.
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In real estate, all-cash buyers are king. It's common knowledge that buyers who come in with all-cash offers can close quickly and offer the most secure deals, often beating out other offers backed by conventional financing. But with recent mortgage rates at record lows, financing has also become very appealing. So which option should you choose?
A recent phenomenon called delayed financing is becoming a common practice of affluent buyers. Instead of deciding between bringing a strong, all-cash offer and the benefit of record-low financing, buyers are choosing both. With limited inventory and competitive bidding, these buyers are coming in with strong, all-cash offers, only to turn around and secure financing as soon escrow closes. Rarely used two years ago, delayed financing is becoming very popular in >$1 million coastal housing markets. To learn more, check out this recent Wall Street Journal article.