Money talks: One-third of home sales all cash
All-cash offers accounted for 33 percent of home sales in the National Association of Realtors’ May 2013 Confidence Index.
The majority of those all-cash offers came from investors and international homebuyers.
All-cash offers can represent stiff competition for traditional buyers. For example, first-time homebuyers, who are already facing low inventories and rising home prices, view all-cash offers as one of their biggest competitions in the market today.
But for a seller, an all-cash deal is attractive, cutting out potential obstacles in making it to closing. “If you own a home and are selling yourself, it’s probably easier if someone pays you cash – it cuts out the messiness and having the homebuyer get approved for a loan,” said Patrick Newport, U.S. economist at IHS Global Insights.
A high number of all-cash offers in the housing market can “signal a housing market that people are more willing to invest in,” said William Delwiche, investment strategist at Baird Research & Insights.
“A lot of those cash investors are looking for a return,” said Karen Dynan, vice president and co-director of economic studies at the Brookings Institute. “If a lot of people think home prices will rise, they will put money into the market, and that increases demand and pushes up prices.”
Cash-buying can be good for the economy, providing it with a short-term boost. It “helps to bid up asset values for houses, and is good for homeowners who already own houses,” Delwiche said. “There is also a benefit to state and local government finances because of the taxes associated with these purchases.”