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Cash Sales Increase, Listing Time Decreases - Dynamics are Changing for Homebuyers and Sellers
If you are considering purchasing or selling a home in the near future, there are two key market changes you should be aware of: First, all-cash buyers have surged since the housing downturn, and second, the typical amount of time it takes to sell a home is shrinking.
Academic experts took a closer look at cash buyers and how time-on-market impacts home sales during the "Changing Dynamics of Recent Home Buyers and Sellers" session at the 2012 REALTORS® Conference and Expo in Orlando, Fla.
"We've seen a tremendous increase in cash buyers since the housing downturn that we haven't seen before in history," said Lawrence Yun, chief economist of the National Association of REALTORS® (NAR). Yun said a decade ago all-cash home purchases were less than 10 percent of the market but have increased steadily since 2008, to as much as 30 percent of sales.
Yun said the increase in more buyers paying cash for real estate reflected tight lending conditions and an increase in investor sales, which account for the bulk of cash sales. Increases in the number of international buyers, who often have financing difficulties when purchasing a home in the U.S., are also adding to the rise in cash sales. NAR research shows that 62 percent of international purchases were all cash; the percentage has continually increased since 2007.
Recent NAR research on down payment sources may offer insights into how cash buyers are receiving funds for home purchases. According to the 2012 NAR Home Buyers and Sellers Profile, 40 percent of repeat buyers use the proceeds from the sale of their primary residence as a source of down payment, but downsizing boomers may have enough equity left from their home sale to pay all cash for their next purchase. Yun also noted that one in 10 buyers rely on proceeds from the sale of stocks or 401k disbursements for down payments; those with stable jobs and who saw investment gains in recent years may be using those cash funds to buy a home outright rather than financing the purchase.
Thomas Springer, professor of Finance and Real Estate at Clemson University, also took a look at the changing dynamics when it comes to the amount of time a listing is spending on the market. He discussed how time-on-market responds to employment changes and varies with shifting market and economic conditions. Springer analyzed market data from more than two dozen metro areas. His findings indicate that, at the property level, time-on-market is a function of property characteristics, price and market factors; however, at market level, time-on-market is a function of local, national and global economic and market factors.
Yun said that tightened inventory conditions are also impacting time-on-market, which has steadily decreased nationally since the start of the year, as are homebuyers' search processes.
"Tightened inventories in some places mean homes are selling more quickly and reducing time-on-market," Yun said. "Our research shows that last year, homebuyers saw 10 homes before buying, down from 12 the year before, and more than half of buyers reported that finding the right home was the hardest part of the home search process."
As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.
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