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More than half of all homes today are being purchased with cash, up from 20% before the crash, Goldman Sachs economists say.
So you can't get a mortgage, but it doesn't matter because a hedge fund is going to undercut you with a cash offer anyway.

Wall Street Journal Developments blog excerpt:

More than half of all homes sold last year and so far in 2013 have been financed without a mortgage, according to an analysis by economists at Goldman Sachs Group.

The analysis estimates that around 20% of all homes sold before the housing crash were “all-cash” sales (or around 30% of sales by dollar volume). But over the past seven years, the all-cash share of sales has more than doubled, increasing by more than 30 percentage points, according to economists Hui Shan, Marty Young and Charlie Himmelberg.

The Goldman study analyzed home sales figures from the Census Bureau and the National Association of Realtors and mortgage-origination data from the Mortgage Bankers Association and Lender Processing Services.

The surprisingly large cash-share of purchases helps to explain why home sales have jumped over the past two years despite more muted increases in broad measures of new mortgage activity, such as the MBA’s mortgage application index.

There’s no exact way to know who is responsible for all of these cash purchases, though they are likely to include some combination of investors, foreign buyers, and wealthy homeowners that don’t want to go through the hassle of getting a mortgage before closing on a sale. Mortgage lending standards have sharply tightened up since the housing bubble, with banks scrutinizing borrowers’ tax returns and bank statements to verify their incomes and the source of their down payment ....

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Comment Preferences

  •  no surprise; There are no EE bonds any more (9+ / 0-)

    while Treasuries suck and the bond market is depressed and stock market appears to be extremely overvalued.  Simply put, cash is king in real estate as people are turning to real estate as a possible solution to a really crappy investment landscape where risk is so disproportionate to reward.
    Back in the day, bank savings accounts paid 4%; now they pay .5%

  •  Houses in the SF bay area are around $700k (7+ / 0-)

    You'd have to be pretty damn rich to pay for that all with cash.

    "Victory means exit strategy, and it's important for the president to explain to us what the exit strategy is." - George W Bush

    by jfern on Thu Aug 15, 2013 at 04:37:39 PM PDT

    •  These people are 0.1 percenters. (11+ / 0-)

      They can afford it.

      Normal people are squeezed out of housing -- and, these days, everything else good that one used to take for granted.

      This shows that reports of a 'housing rebound' are bullshit.

      The hungry judges soon the sentence sign, And wretches hang, that jurymen may dine.

      by magnetics on Thu Aug 15, 2013 at 04:48:45 PM PDT

      [ Parent ]

      •  I am reminded of the land barons of 1839 (7+ / 0-)

        From zinn's people's history of the united states

        That December, a sheriff and a mounted posse of five hundred rode into the farm country, but found themselves in the midst of shrieking tin horns, eighteen hundred farmers blocking their path, six hundred more blocking their rear, all mounted, armed with pitchforks and clubs. The sheriff and his posse turned back, the rear guard parting to let them through.

         This was the start of the Anti-Renter movement in the Hudson Valley, described by Henry Christman in Tin Horns and Calico. It was a protest against the patroonship system, which went back to the 1600s when the Dutch ruled New York, a system where (as Christman describes it) "a few families, intricately intermarried, controlled the destinies of three hundred thousand people and ruled in almost kingly splendor near two million acres of land."

         The tenants paid taxes and rents. The largest manor was owned by the Rensselaer family, which ruled over about eighty thousand tenants and had accumulated a fortune of $41 million. The landowner, as one sympathizer of the tenants put it, could "swill his wine, loll on his cushions, fill his life with society, food, and culture, and ride his barouche and five saddle horses along the beautiful river valley and up to the backdrop of the mountain."

        And what rough beast, its hour come round at last, Slouches towards Bethlehem to be born?
  •  I'm sorry.... (3+ / 0-)
    Recommended by:
    JeffW, SuetheRedWA, KenBee

    I don't believe it one bit. Especially since it's a Goldman Sachs "study".

    •  Let me elaborate.... (2+ / 0-)
      Recommended by:
      petral, Odysseus

      If we have learned anything over the last five years, it's that there are no guarantees that houses are going to appreciate predictably over time. And as an asset ,houses can and have been difficult if not impossible to sell if the owner needs cash. I'm sure that the premise here is that only people with money are the ones buying these houses but only a fool would tie up all that cash when they could leverage that asset with a mortgage at some of the lowest rates this country has ever seen. Not a very smart move for people that have that kind of money. Now, if Goldman Sachs or hedge fund managers were pushing this "study" as a vehicle to swindle it's less savvy investors into investing in an asset class they don't understand, then maybe I could see that. Otherwise, it just doesn't make any sense.

      •  only way we could buy was cash (3+ / 0-)
        Recommended by:
        Bronx59, raines, Odysseus

        nobody but a crook would loan us money, get real...we were lucky our previous house sold, thank dog who put the lovely lady on to us...but no way would we have a mortgage and no way would we chose to have one and all the strings and lies they could run on us.

        But I bet most of these are 1%ers and investors and rent collecting class, very few lower income people I would safely bet...and add to the list those who were forced out of pricier homes and are lucky enough to have some savings to buy a cheaper house.

        Many stories out there in the big city.

        This machine kills Fascists.

        by KenBee on Thu Aug 15, 2013 at 10:13:58 PM PDT

        [ Parent ]

      •  Not necessarily. (1+ / 0-)
        Recommended by:
        only a fool would tie up all that cash when they could leverage that asset with a mortgage
        If you leverage that asset, it is no longer your asset.

        There is great peace of mind in not having a mortgage. We built with cash 20 years ago and I have never regretted it.

        Sure it meant a lower cash flow, but it also meant no house payments and knowing that our house was safe, no matter what the economy was.

        Of course, we had to economize when building more than if we had gotten a mortgage because there was a limited amount to spend (very little wiggle room for nickel and dime-ing ourselves into several thousand dollars more). For instance, we put in some really cheap lighting in the kitchen, thinking we could upgrade in a few years. We finally got around to changing the lighting this summer. There were lots of things like that, a few of which we have gradually upgraded, some left to do, and some we have just gotten used to and don't plan to change.

        You can't scare me, I'm sticking to the Union - Woody Guthrie

        by sewaneepat on Fri Aug 16, 2013 at 06:05:28 AM PDT

        [ Parent ]

  •  Cash purchases appear to be dropping (4+ / 0-)
    Recommended by:
    FG, johnny wurster, mystique mist, KenBee

    No question that cash purchases have been higher over the last couple years than in earlier periods.  But these numbers appear to be much higher than those reported by other sources that I consider reliable. (Like this report that only includes California.)  I question the validity of this report without them showing their work.

  •  This is the scariest thing (1+ / 0-)
    Recommended by:

    I have read in a few months.  

    This means that the entire economy is being bubbled again.

    The Fed is financing the cornering of the housing sector

    If the American people ever allow private banks to control the issue of their  currency, first by inflation, then by deflation, the banks…will deprive the people of  all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)</</em>blockquote>

  •  I can't see a 1-perecenter buying our... (5+ / 0-)

    ...rundown old bungalow for cash, unless they own the construction company that will build a new big-box house on the lot after the old house  is razed.

    Float like a manhole cover, sting like a sash weight! Clean Coal Is A Clinker!

    by JeffW on Thu Aug 15, 2013 at 05:17:12 PM PDT

  •  A lot of those sales are foreclosures... (10+ / 0-)

    and short sales. What sold for 130k at the height of the boom is now selling short for 52k. That's a different crowd buying for cash. These are not necessarily the rich folks. I know a young couple who bought their first house at foreclosure with loans from family, money saved up, etc.  48k for a decent house in the Madison area.

    To make others less happy is a crime. To make ourselves unhappy is where all crime starts. We must try to contribute joy to the world. That is true no matter what our problems, our health, our circumstances. We must try. Roger Ebert

    by lexalou on Thu Aug 15, 2013 at 05:33:18 PM PDT

  •  These statistics... (3+ / 0-)
    Recommended by:
    mystique mist, KenBee, raines

    are pretty accurate, at least for where I live, i.e. Palm Beach County.  Investors are buying up real estate like crazy, at still undervalue prices, and driving most 1st time homebuyers out of their own price range, and ability to finance.  The investors are paying cash, and this is appealing especially to those properties that have been foreclosed, or for a seller desperate to sell who doesn't want to take the risk of a buyer subject to the whims of the mortgage industry.

    Several months ago, the Clerk and Comptroller presented her annual report to the County Commission.  What she reported was that the entire county now represented in the 58% or so range of home occupancy by property owners (or second homes), meaning the rest were rental properties.  She also reported that most new construction was multi-family, investor driven for rental purposes rather than home ownership.

    In addition, state-wide, flipping has again become a trend, although not as large of a problem as it was during the height of the boom.

    •  Yep, in SoCal as well. As I think I mentioned (4+ / 0-)
      Recommended by:
      LtdEdishn, petral, Alfred E Newman, KenBee

      in a another diary, the buyers aren't even coming in below market value...they start above the asking price and outbid those who want to make an offer by tens of thousands of dollars! They are being bought mainly by investors who will buy and rent them out rather than flip them, especially since landlord expenses are write off. So it isn't exactly the 1%ers but it ain't main streeters either.

      •  The last "thread"... (2+ / 0-)
        Recommended by:
        mystique mist, KenBee

        of the American dream, i.e. home ownership, unraveled during the "great recession" that I always thought was more aptly described as a "depression".  The "recovery" is, imho, no recovery at all, at least for the majority of the populace.

      •  Most investors (0+ / 0-)

        Stopped buying in So Cal earlier this year. The all cash purchasers never came anywhere near 50% in California as a whole or So Cal where it's unlikely it ever got any higher than 35%, though it may have been higher in some isolated regions or neighborhoods.  

        The all cash buyer is still at pretty close to 50% in the Las Vegas market. The Phoenix market may have been that high, it isn't anymore. It's dropped to closer to 35%, with investor interest sharply dropping over the last few months with distressed sales recently dropping to 20% of the total sales.

  •  I would think a significant amount of these (5+ / 0-)

    purchases could be foreclosure purchases.

    "Don't Bet Against Us" - President Barack Obama

    by MRA NY on Thu Aug 15, 2013 at 05:41:50 PM PDT

  •  A lot of the cash buyers are individual investors. (2+ / 0-)
    Recommended by:
    sewaneepat, misslegalbeagle

    Often retired or almost retired people.

    •  Wall Street private equity (0+ / 0-)

      bought 10's of thousands of homes across the country over the last 2 1/2 years, probably the majority for cash. Their purchases dwarfed the numbers purchased by individual investors. They're still buying in some markets, but not near as many as they were in a year ago.

  •  Could be demographics. (5+ / 0-)

    Most of the retirees I've known sold their expensive houses up North and bought cheaper homes down South outright with the cash.

    (Though I agree with the commenter who said foreclosures might be a big part too.)

  •  I bought a house with cash in 2005. (3+ / 0-)
    Recommended by:
    Gooserock, worldlotus, KenBee

    I'd sold out my share of a house in ca. moved to oregon and didn't have a job, so i didn't think i could qualify for a mortgage and had the money on hand. unfortunately, I never found a job, ran thru my savings and ended up selling for half of what it was worth. Damn Bush economy

    "Truth catches up with you in here. It's the truth that's gonna make you hurt." - Piper Chapman

    by blueoregon on Thu Aug 15, 2013 at 06:15:40 PM PDT

    •  Exactly the Worst Time to Do That Unless the (1+ / 0-)
      Recommended by:

      property had a special hook.

      In this NYT graph the 60's and 70's wobble along basically a 100 year average other than the Depression years.

      Image Hosted by

      Then in 95 or so everything went insane.

      You came in just off the right end of the graph. House prices would've been just about at the top line of the chart for you. They had to come down, way way down.

      So sorry.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Thu Aug 15, 2013 at 06:38:58 PM PDT

      [ Parent ]

  •  I'm reading about skyrocketing (0+ / 0-)

    prices in all the places that suffered most in the last bust.

    I'm living in America, and in America you're on your own. America's not a country. It's just a business.

    by CFAmick on Thu Aug 15, 2013 at 08:23:44 PM PDT

  •  I was also thinking today (0+ / 0-)

    that if someone had $1 billion, they could corner the market on premium valued rare coins.

    Or, if there are individual coins that have  documented appreciated faster than inflation for 150 straight years, why not pool a group of investors to purchase a 1, 2, or 3 million dollar coin?

    I'm living in America, and in America you're on your own. America's not a country. It's just a business.

    by CFAmick on Thu Aug 15, 2013 at 08:26:25 PM PDT

    •  The rare coin market is fickle. (1+ / 0-)
      Recommended by:

      It is not easy to make money in it. For every coin that has had a huge price increase, there are many that have not. It's mostly the highest grade pieces (65 or above), in PCGS holders, that have appreciated recently (and most of those coins are now at alltime highs). And auction houses charge 17.5% now every time a coin turns over. Numismatics is a great hobby. It's not such a great investment.

  •  'no way to tell...' ain't buying that bullshit (0+ / 0-)

    that's cover for the high % of investor rent collectors who are reaping the profits of crashing the economy, this was The Plan after all...

    This machine kills Fascists.

    by KenBee on Thu Aug 15, 2013 at 10:09:01 PM PDT

    •  Rents are impressive here in DC area (0+ / 0-)

      Renting the house we live in would cost almost $1000 a month more than our house payment.  

      This is in what our daughter calls a "semi-shady" neighborhood miles further out than the walkable areas that are now preferred by most people.

  •  I have no idea who is buying with cash, but it (1+ / 0-)
    Recommended by:

    certainly is happening. Over the past month my son and daughter in law were looking to buy a larger house. They offered full asking price on one  house the first day it was offered and got out bid. Next house they offered above asking price on first day; got outbid. Third house they offered substantially over asking price and got the house, but it was touch and go because someone made a cash offer; fortunately, son and d-i-l offered enough that their offer was taken.

    So they put their house on the market and had 5 showings the day before it was officially to go on the market. They got a cash offer of $1000 over asking price that day. I'll have to ask them if they know whether someone was buying it for themselves or for an investment. The Nashville housing market is booming.

    I imagine some are investments and some are from individuals. I know Dave Ramsey has been preaching for years about using cash to buy a house.

    You can't scare me, I'm sticking to the Union - Woody Guthrie

    by sewaneepat on Fri Aug 16, 2013 at 05:48:05 AM PDT

    •  FWIW, none of these houses were foreclosures. (0+ / 0-)

      Also, none were new houses. All the ones they were looking at were in one particular neighborhood in a good school district. The house they are selling is a 2 BR, 1 bath house in East Nashville which is a good location for young people or retired people, near great restaurants, bars,  and artsy shops.

      You can't scare me, I'm sticking to the Union - Woody Guthrie

      by sewaneepat on Fri Aug 16, 2013 at 05:54:25 AM PDT

      [ Parent ]

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