Investor Cash Is Forcing Home Prices Down
Posted on | January 27, 2012 | No Comments
Based on a recent survey, cash buyers were to blame for the driving down of home prices. The survey showed that 1 out of 3 home buyers are cash buyers, and they make the home prices go down by paying in straight cash. Paying in cash is a strategic way to negotiate your desired terms. Rich inventors are buying foreclosed properties in cash, but at bargain prices. Cash inventors doubled against the last two years and is currently accounting for one third of all real estate sales. The increasing number of foreclosure properties drive down the prices of homes in most markets. The average sales price of homes went to its lowest level in a long time last month.
First time home buyers could benefit from the low prices, but lending institutions are being strict with regards to loan approvals. Cash investors are particularly interested with the foreclosed properties because they can take advantage of a good deal, and ask for a bargain price. Your average home buyer just doesn’t have the cash on hand to take advantage of these deals.
Sales of pre-owned homes rose a bit in January, and the number of first-time buyers went down 29% to its lowest level in two years. Foreclosure sales are making up 37% of all real estate sales. Cash transactions are 32% of all home sales – twice as high than the previous two years. In Florida, Arizona and Nevada, where foreclosures are especially rampant, sales of at-risk homes are 2/3 of total home sales. In Florida alone, foreclosure sales accounted for 63% of all sales in January. In Florida and Arizona, the number was closer to 72%.
First-time buyers are having difficulty in acquiring houses even if it is at a low price because lenders have tightened their standards for credit approval. This made mortgage loan approval harder to acquire. Banks and lenders are now requiring a bigger down payment when purchasing a house, unlike before where buyers could get a house with little or no down payment at all. The average down payment went up by 22% last year in 9 key cities in the US.
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