The traditional home mortgage has taken a back seat to cash sales in South Florida, more so than any other place in the country. Cash buyers are leading the housing market recovery, Real estate agents said, but at the same time making it more difficult for middle-class buyers, who don’t have that kind of cash on hand and already face tight lending standards, to secure a mortgage.
Florida was king of cash sales in the second quarter of this year, defined as single-family homes and condos where no loan was recorded at the time of sale, according to a report by the research firm RealtyTrac. The state swept eight of the top 10 areas for cash sales in the country. The Cape Coral-Fort Myers area saw 62 percent cash sales, and Sarasota-Bradenton-Venice 61.5 percent, the second and third highest of the 100 largest metro areas in the United States
The greater Miami area took the top spot at 64 percent. Hidalgo County, Texas, and the Las Vegasarea rounded out the list at numbers seven and 10. The national average was 37.9 percent.
Those figures are “very consistent with what we’re seeing here in Charlotte County,” where cash accounted for 66 percent of single-family home and condo sales in the second quarter, said Roger Morris, managing broker at Michael Saunders & Company.
Nationwide, cash sales were especially high for the cheapest and the priciest properties, RealtyTrac says. In the luxury Naples market, Realtor Corey Cabral reported that fully 96 percent of his homes sold for cash in the last two years, priced from $500,000 to more than $1 million.
In addition to the sunny lifestyle, buyers were attracted to the lower prices, driven down in the wake of recession and now beginning to appreciate again. Too, cash deals don’t require the red tape of loan applications and appraisals.
CABRALThe cash buyers fall into three main categories, said Daren Blomquist, RealtyTrac vice president: investors aiming to flip or rent property, from institutions such as Wall Street firms to individuals; foreign buyers looking for a safe haven for their money or a trophy property; and retirees who may have sold a home up north and brought the proceeds south.
They may also have cashed in other investments.
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“They were able to see a significant gain in their stock portfolio,” said Randy Thibaut, president and CEO of Land Solutions, which specializes in residential tracking and land transactions in Southwest Florida. “They took some of those winnings of the table and instead of reinvesting it used it to buy a home in Southwest Florida while prices were still down.”
The influx of cash helps the market recover in the “short term,” said Mr. Blomquist, but traditional mortgages play an important role in allowing young families and other middle-class buyers to enter the market.
BIENZ“We need to see more first-time home buyers and move-up buyers participating in the housing recovery for it to continue to happen,” Mr. Blomquist said.
Mr. Morris added that buyers who need a loan and compete with cash offers generally lose unless they are especially credit worthy and make a higher offer.
The average price point for cash sales of single family homes is about $150,000 in Charlotte County, while the average overall is $170,000, said Crystal Bienz, a Realtor based in Punta Gorda.
“The low end is right now almost strictly cash,” she said. “The regular buyers, they can’t compete with these cash buyers.”
Cash buyers helped absorb distressed property but eventually, Mr. Thibaut predicts, they will be fewer in number.
“And that is where the challenges lie,” he said. “Because most of the people who have decent credit and had the ability to go get a loan have, and now what’s showing up is the challenged credit buyers.”
Mr. Blomquist notes cash sales have already abated slightly from a year ago in South Florida, by about 2 percent, indicating a continuing decrease in the trend that began when the housing market bottomed out after the great recession and vulture buyers began to swoop in looking for deals.
Luxury homes for cash
Corey Cabral has been a Realtor in the Naples luxury housing market for the better part of four decades and is watching the trend in cash sales with fascination.
“This is a dramatic change in the real estate market in recent Naples history,” he said.
With home interest rates so low, buyers might consider taking out a mortgage and investing their cash in the surging stock market instead, he points out. But that’s not happening, indicating that cash buyers see a home as a better bet than stocks or other investments.
“The national and international (buyers), particularly, consider Naples to be a very secure marketplace for investment and I believe that’s why they’re willing to leave their cash here in the real estate instead of other avenues for investment,” he said.
For Mr. Cabral, Canadians are his top international market. There is also a mix of European, Asian, Indian and Brazilian buyers.
“The investor doesn’t have the confidence in the governments and so they look to invest their profits outside of their own country in the U.S. marketplace.”
Mr. Cabral has been through three recessionand recovery cycles, he said, and finds in the current version cause for both concern and confidence. “I don’t like to see a recovery at the pace that it’s moving at because it’s a clear duplicate of the last recovery we had, moving too fast, ultimately ending in a bust,” he said. “But what’s very different now — this boom is being driven by cash buyers. The last boom was driven by cheap mortgage access. Anyone who was a warm body could come in and get a mortgage back in 2004, 2005 and 2006, and that was fueling the huge price run-up inCollier County whereas today we’re not seeing it at all. Even if there’s a pullback, the cash buyers aren’t going to have to bail and run.” ¦