Posted on 12/22/2013 10:28:58 AM PST by Kaslin
Even though household formation by millennials is at a record low percentage, home sales are at modest levels thanks to investor all-cash buying.
Market-Watch notes All-Cash Home Sales Reach New High.
More Americans are buying homes in all-cash deals, according to a new report. But real-estate experts say this increase may not be a good sign for the health of the housing market, which may also be impacted by the Federal Reserve’s decision to pull back on its bond-buying program.
All-cash purchases accounted for 42% of all sales of residential property in November 2013, up from 39% during the previous month, according to data from real-estate data firm RealtyTrac released Friday. “This is still a very cash- and investor-driven market,” says Daren Blomquist, vice president at RealtyTrac.
The cities [states?] with the biggest month-over-month jumps in the number of all-cash sales, according to RealtyTrac, included Florida (63%), Georgia and Nevada (both 51%), South Carolina (50%) and Michigan (49%). This helped boost overall sales of U.S. residential properties, which sold at an annualized pace of 5.1 million in November 2013, a 1% increase from the previous month and a rise of 10% from a year ago.
The decision by the Federal Reserve Wednesday to reduce its bond-buying program to $75 billion per month starting in January, from $85 billion per month currently, may also encourage more cash-purchases — at least for those who can afford it, Blomquist says. “They’re going to do everything they can to keep interest rates low, which may be tough to do,” he says. To reduce cash buyers, he says there will need to be low interest rates and a cooling off in home price appreciation. “Otherwise, you’ll see the market skew even further toward cash buyers,” Blomquist says.
When interest rates went up slightly in June, there was a notable increase in cash sales, Daren Blomquist says. “Some markets are more interest-rate sensitive than others based on affordability,” he says. “Just a slight increase makes homes a lot less affordable.” In fact, another report by Goldman Sachs in August was even more strongly in the cash-is-king camp, estimating that cash sales now account for 57% of all residential home sales versus 19% in 2005.
A record number of Millennials, adults aged 18 to 32, put off household formation and stay at home to live with parents.
See Haircut Deficit: Kids Living in Basements a Drag on U.S. Services Spending; Since Recession Ended, Durable Goods +34%, Services +6.3%; What's Next?
USA Today reports Average 30-year mortgage rate moves up to 4.47%
Mortgage buyer Freddie Mac said Thursday the rate on the 30-year loan increased to 4.47% from 4.42% last week. The average on the 15-year fixed loan rose to 3.51% from 3.43%.Bankrate 30-Year Fixed Mortgages
A government report issued Wednesday showed that U.S. builders broke ground on homes in November at the fastest pace in more than five years, strong evidence that the housing recovery is accelerating despite higher mortgage rates.
Data from the National Association of Realtors released Thursday showed the number of people who bought existing homes last month declined for the third straight month as higher mortgage rates made home-buying more expensive.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.
The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan declined to 0.6 point from 0.7 point.
Interesting article and consistent with what many of us have been hearing and reading about over the past year. Thanks for posting.
Word is the Chinese are buying up all the discounted real estate in Detroit. Also, Michigan farmland.
People are trying to avoid the crushing payments from monthly debt...
The future is just to uncertain to take on these debt burdens...
Investors yep...That too..
And other people are trying to avoid the crushing payments from monthly debt...
The future is just too uncertain to take on these debt burdens....
When people come into money or are able to payoff big ticket items like mortgages, they are doing it in record numbers.
“..buying up all the discounted real estate in Detroit.”
Quite a bit by the river, with the intent of building an automotive plant, so indicated by a FR post or Fox News report from awhile back. Can’t remember which one.
When does the ObamaCare taxes on home sales go into effect?
Make that auctions of homes that have been defaulted on have been selling for all-cash to flippers for pennies on the dollar.
Odd — who has that kind of cash and even if they do, when interest rates are at record low, why not take advantage of that and keep the cash for security or other investments.
As some say, the only reason I can think of is that indeed foreign interests are buying the US real estate.
Another factor might be that three of the states are FL, SC, and GA. I’m wondering if a lot of those sales aren’t retirees using profits from selling their former houses.
Iirc it has been in effect this year. But only high end sales and i think minimum 400,000 in taxable incomr
I bought with cash two rent houses in 2013. Will do it again for sure in 2014. Moving money out of the obammy market. I’d rather own real assets than someone’s promise to give your money back to you with interest. Rent has always gone up over the years. This is a great hedge against inflation.
I suspect the majority of those sales aren't from Americans.
I read an article recently on the Amish in Ohio (I think) selling their oil and gas rights and moving “tax free” to unspoiled farms elsewhere.
The Amish wanted to be away from the drilling and move to depopulating areas like rural New York state and Pennsylvania. The article decried their “tax free” option of selling 50 acres and oil rights and buying 200+ acres somewhere without development.
We will have to finance but it will probably be a 5 year mortgage.
If I buy rental property for cash and then rent it out, the deal is between me and the renter. I can pick the renter, and I own the house. I can net 10 to 12% annually on my money by owning rental property. I'm semi retired, I'm good at fixin' stuff... and need to invest in income producing sectors. Why would I take the wall street / government risk with my retirement?
They know that the less you owe the less you can live on.
In the case of the ChiComs, power over the US, since the government is behind it.
Sounds good to me. Who wants to pay $400,000 for a $250,000 house?
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