All-Cash Offers: Healthy for Real Estate Market, or a Hindrance?

Posted by Craig Schaid on Monday, March 31st, 2014 at 1:44pm.

I would agree that there is a TON of cash buying happening in the market today.  In my mind, it’s a GREAT thing! On many different levels.

First, you have the investors out there not only stimulating the real estate market with purchases, but then they continue stimulating the economy by putting people to work! Immediately at closing, you have painters, roofers, electricians and plumbers lined up jumping from that property to the next.

This is all in preparation to either provide housing for individuals that have lost their house, and will not qualify, OR to be put back on the market for an FHA buyer that would NOT have been able to buy the home in the previous condition because there was way too many things wrong with it.

Now, for this first time homebuyer (for example), they are getting a home that has been completely gone through, checked out, rehabbed, and made almost new again!

A win/win for both the economy and the new home buyer.

Below is an article published in reference to this:

With many pointing to the housing market as the backbone of the economic recovery, investors are flooding the market with all-cash offers and it’s squeezing out many traditional homebuyers.

“People are worried about the returns on alternative investments,” says Karen Dynan, vice president and co-director of economic studies at the Brookings Institute. “There is still a lot of uncertainty about bonds and the stock market, which makes the housing market look good.”

According to the National Association of Realtors May 2013 Confidence Report, all-cash offers account for 33 percent of home sales, with international buyers taking the lead. In addition, 87 percent of surveyed Realtors say they are expiring constant or increasing home prices. Homebuyers, particularly first-time homebuyers, are already battling low inventory and rising home prices, but the added pressure from investors creates stiff competition.

William Delwiche, investment strategist at Baird Research & Insights, says cash buys are being bolstered by investor pools snapping up real estate, and less so by individuals looking to live in the home. “These are investment pools paying cash for houses to hopefully get returns,” he says. “It’s not necessarily a trend among individual homeowners because most people going to buy houses don’t have that kind of cash sitting around.”

What are your feelings? I say let the investors keep helping to improve the economy!! And putting America back to work! All while providing excellent housing!

A lot of the foriegn investors are finding excellent deals here in my market, Montgomery, AL.  The investment property provides an ROI that is not easily matched! Montgomery and other Alabama communities are quickly becoming investor hot beds once again! The Cap Rates that are obtainable are many times over 10%, up to 15%!

Please feel free to contact me today if you have any questions! 334 318-8115.

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