WASHINGTON – Feb. 16, 2010 – The residential property market – characterized by favorable prices and tax breaks – is heavily weighted in favor of buyers. Yet average house-hunters, especially those dabbling a toe in the ownership market for the first time, find themselves blocked out by investors flush with cash.
Both first-time buyers and investors who see a good opportunity are making a run at the deeply discounted foreclosures that have flooded the market. However, in a race that pits financing against cash, it is the investors who are emerging as winners.
“Even though a first-time buyer may be offering the same price as an investor, or a higher price, the investor has the edge,” says National Association of Realtors researcher Jed Smith. “The investor may actually pay less, but it’s cash, right now.”
Sellers give priority to cash transactions because the closing process is expedited and the deal becomes less likely to collapse. A lender, for example, might refuse to approve a deal after an appraisal comes in too low.
The cash trend is evident nationwide, with the share of resale homes bought entirely with cash climbing to 22 percent in December from 16 percent a year earlier.
Cash is even more important in places like California, Florida, Arizona and Nevada, where residential values have plunged and foreclosures account for a big chunk of the market. For instance, all-cash homebuyers accounted for 54 percent of sales in Miami in December, 46 percent of sales in Las Vegas and 25 percent of sales in Southern California.
