Back in August of last year, we first reported data [9]that not even believed at first, but has since been proven correct using existing home sales data, namely that a whopping 60% of all home purchases are "cash only." Furthermore, in the eight months since that post, our conclusion has also borne out as absolutely correct:
... due to the very thin marginal source of bidside interest (flipper flipping to flipper and so on), it means that most of America has not participated in this mirage "recovery", and all it will take to send the buoyant housing market crashing is for the one marginal buyer to become a seller. What they will next find, is that when dealing with a bidside orderbook that has zero depth, one indeed takes the escalator down from where the lofty heights achieved courtesy of Fed-funded stairs.
The subsequent tumble in the housing market - both new and existing - confirmed that ther was no "housing recovery" and it was, as we had claimed all along, merely institutional investors bidding up real estate to convert it to rental, and foreign buyers parking illegally obtained cash in US real estate.
However, not even that data could prepare us for what we learned today courtesy of CoreLogic [10], which narrowed down the range from the broader "housing" segment just to the most appetizing (especially for investors and flippers) condo market. What it found was stunning: not less than 80% of all condos in key markets such as Florida, Nevada And New York are all cash.
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Suckers. They are going to be taken for a ride. As Baron Rothchild said, "The time to buy is when there's blood in the streets." We're not there yet.
ReplyDeleteInterest free mortgages are attractive,but the payback time limits are too short,making the payments huge.In addition,interest free means at least 25% added to the initial sale price.
ReplyDeleteFolks, its not that deep. Housing prices went as investors began buying, then skyrocketed because instead of buying low, folks waited to buy until Fox Business and MSNBC started raving about how good an investment it was. Meanwhile as prices skyrocketed, the smart folks knew to sell. Now those same smart folks made record profits and are reinvesting in housing while its at a record low. Thats capitalism.
ReplyDeleteThe real sad part of this is people like my daughter and son in law. Young couple, both college grads, already making significantly more than the median family income but can't secure a loan based on extra restrictions currently on lending. Top it off they are black, which means, as the facts show, the banks would rather deny the loan or steer them towards a buffoon mortgage even though their credit is the same or better than alot of other buyers out there.
1:49 - What on earth are you talking about?
ReplyDeleteNot really a new innovation. I have seen many many RE sales involving the transfer of a "briefcase", usually where the sales price appeared to be "unusual".
ReplyDeleteMost of you are clueless. Here is the real situation. The areas thart were the first to suffer economic decline in the housing market have already recovered. The rest of the country is still heading for a bottom or has reached it. Wicomico county and the eastern shore saw huge increases in property values when there was easy money (2005-2006). Unless you own waterfront property or property in OC, it will be a long time if ever that you will see your property valued at 2006 prices. As prices eventually rise on the western shore, boomers will sell and look for places to retire. Easton is beyond the reach of most of them. the next spot is Dorchester (Cambridge) and then Salisbury/Delmar. There is very little chance of any economic recovery on the shore. Manufacturing is sent over seas and without an international/educated population, no modern company will ever come to Salisbury. Google Seattle WA demographics.
ReplyDeleteDrug money!!
ReplyDeleteNot sure what seems to be bad about a cash purchase. After saving for many years, we recently bought a vacation home in cash. Feels good to have no mortgage payments and since we bought for our enjoyment rather than as a get rich investment we don't stress about how fast the housing market is recovering.
ReplyDeleteCash purchases are the worst thing in the world to the banking and insurance industry. That is why they pay to have negative articles published. I own multiple properties with no mortgage and refuse to pay for title insurance/homeowners/flood insurance. Insurance is a scam and the banks and insurance companies are collaberating to get money form those that cannot pay for their homes/property in full. Look at the statistics of how many homes suffer a catastrophic loss. The odds are in your favor unless you engage in risky behavior. Do the math - 5 houses with no insurance @ 1300/yr. = $6500/yr. No losses in 10 years = 65,000 which is enough to replace a single family home if a loss happens. It is even better if the homes are subject to flood ins. Insurance is another tax on people that cannot pay cash.
ReplyDelete2:26-When one gets wind that a developer (usually in the early phase of a development)is cash strapped & desperate for operating capital they will often work out an interest free deal.The mortgage is typically for 10 years or less and has a premium added to the appraised value of the home.The payback,even with the added premium is still a far far less amount of money than a conventional mortgage calculated over as long as 30 years.
ReplyDelete8:51 - I say you don't know what you're talking about. What you are talking about involves a mortgage so that is not a cash deal. The point here is the only buyers there are don't have to borrow to buy. These buyers are the top 1/2% that have grown richer during this faux recovery.
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