Posted on 08/15/2013 4:50:56 PM PDT by Nachum
Remember when housing was the primary aspirational asset for a still existent US middle class, to be purchased with some equity down by your average 30 year-old hoping to start a family in his or her brand new home, and, as the name implies, aspire to reach the American dream? Those days are long gone. Back in those days the interest rate on the 10 Year bond mattered as it determined the prevailing marginal affordability of leveraged real estate. That is no longer the case, at least not for about 90% of Americans, because as Goldman shows, while before the great crisis only 20% of home purchases were "all cash", since then the number has soared threefold, and currently the estimated percentage of cash transactions (by count and amount) has hit a record 60%. In other words, less than half of all home purchases are debt-funded, and thus less than half of all home purchases are actually representative of what middle-class America is doing.
(Excerpt) Read more at zerohedge.com ...
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Chinese real estate is at about 18X annual income, which makes us look like a bargain. This time it will be the Chinese and Europeans who will lose their shirts. But at least we will get that Wall Mart money back.
I haven’t seen the data, but I would not be terribly surprised if this is including “investor” transactions, where the financing is arranged separately from the property purchase. In other words, there’s no mortgage on the individual dwelling, there’s a pool of money coming from debt and equity and the pool is doing the purchasing.
They think the properties are cheap, or at least that they’ll appreciate further.
I have a neighbor who has helped his son buy a couple properties for cash, but after the sale is closed he gets financed..it is easier to get the property that way.
Ultimately, the property is financed.
I am 67. I have invested and saved for my retirement. I did not care to retire in the location where I lived while I worked. I sold my primary residence, which was paid in full, and bought two homes, all cash, where I want to spend summers and winters.
It is a matter of downsizing. I no longer needed a large home to raise a family. It is fairly easy to buy two smaller homes from the proceeds of one larger home.
I am not a carpetbagger.
My husband is a builder in Northern Virginia. We did not buy anything in 2005+; we finally bought a house last year-a run down 50 yr. old place- and redid it . That was the first year for us, anyway where cash meant something to the seller.
A lot of bank repos are being sold off like this.
We bought one in Payson AZ as a vacation home in the forest. (We’re in it this week.) It wasn’t really distressed, but there were enough problems that the bank didn’t want to fuss with inspections. There was a deck which was hazardous, new carpet REQUIRED (thanks cats!), and a dilapidated front staircase. Several people who made offers had actually backed out once they got estimates for repairs. Because of the condition we got it at 50% of the Zillow price and we were elated.
On the other hand, I used retirement funds knowing that I can always get my money back or retreat from the big city as required.
Investors. I have purchased 3 homes since 2009 and paid cash for all 3. Deals are there to be gotten and now is the time to invest.
With Bernanke pushing everyone out of bonds the only choices left are risky stocks or investment properties. Those that are not professional gamblers will lean more towards investment properties in addition to overseas buyers trying to unload their dollars into investment properties before it crashes. Rental prices are skyrocketing as the middle class disappears and they no longer can afford to buy.
I love ZH, but also as someone well-versed with statistics, I have to take issue with this.
Weighting averages has to be part of this, but it is not.
Many, many of the cash purchases are for crap, flipping houses which are investments. The $150k houses are still not being paid for in cash for the most part.
There is a lot of striations that are needed to parse this data...I expect better from ZH.
If you take net $dollars of houses and assign a percentage, it ain’t even close...yes, all cash purchases of real estate have risen, in the commercial space, too.
Thats what I did, right off the courthouse steps, for much less money than the average car price. Cash. I'm not rich by any means, just happen to have the amount in an account that I had accumulated for 20 years, dipped into that to buy the place. Took a lot of hard work, time, and a bit of money, but its home now.
Many of the sales are to foreigners. Those who pay enough get green cards.
Property is through the roof in some areas of LA ... in mine for instance. Many, many multiple cash offers paying a premium.
Hedge funds are buying “rentable” single family homes in good neighborhoods.
My daughter sold her starter home (located in Indiana) to a hedge fund (in California) this spring. They bid 97% of the asking price, all cash deal.
Not in my neighborhood. My neighborhood is gentrifying like many others. They become less working class, more whir collar.
I bought a house in another neighborhood 2 years ago after my old neighborhood gentrified. I had an eye on my new neighborhood with hopes it too would do the same. It has and the results have been terrific for homeowners.
You must be in a warm, southern neighborhood. We had a low of -39, F, in my area on the Rockies last winter and quite a few other nights below -30.
Well, Los Angeles, is my hometown and I’m in my 60s. The weather is pretty terrific. Everything is pretty terrific except the politics and traffic.
I tried snow/cold. I just couldn’t handle it.
Buy a house, get citizenship?! Yes, it’s true
http://www.freerepublic.com/focus/f-news/2166907/posts
Schumer to introduce bill giving visas to foreign buyers of U.S. homes
http://www.freerepublic.com/focus/f-news/2795538/posts
Money Can’t Buy Love, But It Can Open The Door To US Citizenship
http://www.freerepublic.com/focus/f-news/3013432/posts
Renters no more [Illegal Aliens Buying Houses Alert. Part Of The President’s Virtual Fence?]
http://www.freerepublic.com/focus/f-news/1677670/posts
I would think quite a few of these are recent retirees who sell the family home to move to AZ, FL, or TX or to be near one of their children who are halfway across the country. The sell and take the cash for a replacement home. In many cases though it will take more money to buy at the new location after selling at the previous lcoation.
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