Cash Is Fueling Quick Home Sales

Cash buyers are increasingly out pacing first time home buyers for many months in a row now. We have verified frenzies of cash and investor home buyers in several regions now.  Unlike some folks, this does not concern me. Sure it translates to challenges for non cash buyers trying to buy a home and having to compete with these guys.  But if you ask me home prices may have risen too high too fast in some of these places.  And real buyers may be well advised to stand by until the true level of home values settles in.  Home values in an area need to be tied to what folks there earn, not to what cash buyers and investors are willing to pay. Only values based on earnings are sustainable.  These other buyers are betting they can get more and more as rental income. But again unless wages go up - which we know is not the case - even increasingly high rent is not sustainable.  The question is what will these buyers do with their homes when they find their expectations don't come to fruition. Cash buyers have no bank to demand a loan modification, short sale, deed in lieu or principal reduction from.  In fact today's tighter lending standards may be the only thing preventing another bubble now. 

 

Real buyers worry not.  We will see more inventory in the not too far off future (from shadow inventory, defaults and foreclosures  working through, more new construction,and sellers who had been on the fence finally listing) which along with natural constraints like wages will temper prices and make finding a home a bit easier for you.

 

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Shari Olefson's picture
Shari Olefson

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