March 28, 2024

Cash Is Fueling Quick Home Sales

The bursting of last decade’s housing bubble feels like ancient history here, where first-time home buyers are competing with investors to get into single-family homes with prices approaching $1 million.

“It’s everyone from a kid out of law school to an investor from China, walking around with thousands to spend,” said Kameron Eliassian, a Los Angeles real estate agent. “I don’t know where it’s coming from, and I don’t care. Just show me proof that it’s there, and we’re good.”

After saving money for years, waiting for the residential real estate market to hit bottom, buyers all over the country appear eager to get back in, lured by low interest rates and the prospect of a good deal.

But with the number of homes for sale at historically low levels and large investors purchasing thousands of properties, buyers are facing a radically changed market and prices are quickly rising.

The percentage of homes bought with cash has shot up in many markets across the nation. Nearly a third of all homes purchased in Los Angeles during the first quarter of this year went for all cash, compared with just 7 percent in 2007. In Miami, 65 percent of homes sold were for cash deals, compared with 16 percent six years ago.

The prices on all-cash deals are also rising significantly. In Los Angeles, the median price on an all-cash home this year is about $351,000, compared with $230,000 in 2009. Over the same period, the median price over all increased to $410,000, up $85,000. In fact, last month, home prices in Southern California hit their highest level in the last five years.

All-cash buyers, typically investors eager to renovate and quickly resell or rent out homes, are making it more difficult for first-time buyers, who typically rely on mortgage loans that can take weeks or months to materialize. More California homes have been flipped in the last year than in any year since 2005.

And while Los Angeles may be a center of the frenzy, it is not an anomaly. Buyers in Boston are offering $100,000 more than the asking price or placing offers on homes they have spent only minutes in. In San Francisco, Miami and Phoenix, sellers are looking at dozens of offers within days of putting their home on the market, often accompanied by letters from would-be buyers professing their love for the property. New York City has seen similar drops in inventory, and prices have been rising steadily since 2009.

Shortly after Andres Alvarez, 36, got married last fall, he began to look for a home with his wife, figuring that their steady jobs, savings and good credit would make them the perfect buyers in Los Angeles. They were ready to spend $700,000. Their optimism deflated quickly.

“We thought we were the cream of the crop, but anything that was in our price range and move-in ready, there was this insane competition,” Mr. Alvarez said. They put in nearly a dozen bids, often losing to cash buyers, before finding a two-bedroom home for $650,000. “It might be a great time to buy, but it’s a horrible time to be a buyer,” he said.

Dick and Susan Yost can vouch for that. They wanted to downsize while leaving their home in Cambridge, Mass., to their son and his family. “We bid on eight places before we finally got one,” Mr. Yost said. “The worst we bid was $85,000 over the asking price, and we didn’t get it.”

Even unappealing homes, he said, had “people all over them.”

Still, there are plenty of skeptics wondering how long the sharp price increases can last.

“People are realizing we’ve probably hit bottom, but the kinds of spikes we’re seeing in places like California seems like history is repeating itself,” said Daren Blomquist of RealtyTrac, which monitors residential sales. “That’s not sustainable for the long term, at least not for the regular home buyer, so I think there are some warning flags there.”

For agents who spent the last several years scrounging for business, the change is welcome. When Mr. Eliassian listed a three-bedroom home in the Hollywood Hills for $699,000 this year, he worried that the current renters would make it difficult to schedule prospective buyers. But with just two open houses — one meant only for other agents — nearly 300 people came through.

“I had to turn the phone off to avoid people asking to see the place,” Mr. Eliassian said.

Within the week, he had six offers, and the home sold for $745,000. He said he had represented and sold homes to more cash buyers in the last year than at any other time in his career.

Article source: http://www.nytimes.com/2013/06/09/us/cash-is-fueling-quick-home-sales.html?partner=rss&emc=rss