If people want to buy a home with a mortgage these days, chances are they will be competing with another buyer who will offer the seller cash.
The trend to buy in cash is rising. In the post-recession recovery of the real estate market, investors gobbled up foreclosures using cash. Now other factors are fueling the cash-is-king trend.
According to a study by RealtyTrac, 42.7 percent of all U.S. residential property sales in the first quarter of 2014 were paid for with cash. This is up 37.8 percent from the previous quarter and is up almost 20 percent from last year at the same time. In fact, the use of cash to buy homes is the highest it has been since RealtyTrac began tracking all-cash purchases in the beginning of 2011.
"Of course, cash is king," wrote Catherine Rampell at The Washington Post, "not only because credit is tight but also because there are so few homes for sale: In many markets buyers basically have to offer cash upfront if they're going to make a successful bid on a sought-after house."
In some metropolitan areas, the majorities of homes sold are being paid for in all cash. RealtyTrac identifies Miami (67.1 percent), New York (57.0 percent), Memphis (54.9 percent), Detroit (53.5 percent), Atlanta (53.2 percent) and Las Vegas (52.2 percent) as some of these cities.
In another article at The Washington Post, Rampell found that even in pricey Manhattan, cash sales dominate everything: "In Manhattan, 8 in 10 homes were purchased entirely with cash in the last three quarters."
Daren Blomquist, vice president at RealtyTrac, told Rampell that he thought that wealthy foreign buyers are driving the high rates of cash sales in Manhattan because they "see Manhattan real estate as a sort of trophy prize."
But aside from investors and rich foreigners, Quentin Fottrell at Marketwatch reports that empty nesters also may have the money to make cash buys of homes.
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