From Florida Realtors
Florida led the nation last month with what one expert called an “astounding” rate of all-cash home sales: 66 percent, a new report shows.
Investor groups, international buyers, landlords and those in the market for vacation homes are fueling a cash-only market that has virtually shut out entry-level homebuyers, who can’t get approved for mortgages.
Lake Mary real-estate agent Tom O’Brien told the Orlando Sentinel he recently represented a single mother employed by Valencia College who wanted to buy a house near downtown Sanford.
“The seller said he wanted to hold out for a cash buyer instead of waiting for her FHA mortgage to get approved,” O’Brien said. “The first-time buyers are the ones who are really struggling; they’re scraping together every nickel, and they’re competing with the cash buyers.”
The influx of cash continues to grow in one of the country’s most volatile states for real estate: Cash sales made up 57 percent of Florida’s home sales a year ago and 61 percent of all sales in June of this year, compared with the 66 percent reported in July, according to the report released last month by the real estate research company RealtyTrac Inc.
“That’s astounding,” RealtyTrac Vice President Daren Blomquist said. Nationwide, only Nevada (64 percent) and Maine (60 percent) came even close to Florida’s tidal wave of cash-only deals.
One factor tipping the scales in cash buyers’ favor has been the tightening of mortgage requirements following the easy-lending era that preceded the 2007-09 recession.
“The home-loan mortgage market has utterly dried up,” said Mark Soskin, an associate professor of economics in the University of Central Florida’s business college. “The market requires buyers and sellers, [but] if you want to buy a house, you have to have cash.”
Private-equity firms and institutional buyers have been actively picking up Florida’s lower-priced houses, fixing them up, and renting them for some time already, but those buyers are moving on to other states, RealtyTrac’s report shows. During July, institutional buyers drove 22 percent of the home sales in Georgia, 16 percent in Nevada, 15 percent in Arizona and 14 percent in Florida.
According to Blomquist, Florida last month attracted more small-scale investors, as well as buyers interested in buying second homes or paying cash for their retirement housing. He said he has heard from investment groups that they have turned to the Carolinas and other markets that still offer good returns and until now have been below the radar compared with Florida.
Another key shift noted in RealtyTrac’s July report was a strong rebound in the number of short sales – closings with sales prices below the balances still owed on the properties’ mortgages.
With one of the nation’s highest foreclosure rates, South Florida has a large supply of bank-owned properties. Lenders aren’t interested in waiting for traditional buyers to qualify for mortgages, preferring instead to sell to investors paying cash.
“That’s where all the action is,” said Lex Levinrad, founder of the Distressed Real Estate Institute, a Deerfield Beach-based club for investors. “The banks have an urgent need to get these bad loans off their books as soon as possible. They’re willing to sell for 30 percent less to a cash buyer rather than waiting for a buyer with a mortgage.”
Much of the cash buying in South Florida is from foreigners who view condominiums as safe investments. In the past year, large funds have entered the region, buying single-family homes and renting them out for a year or longer. The Blackstone Group of New York and California-based Waypoint Homes are two of the larger funds buying in Broward and Palm Beach counties.
Some industry analysts once feared that a so-called shadow inventory of homes would hurt the housing market. But David Dweck, founder of the Boca Real Estate Investment Club, said there are enough cash buyers here to support any excess supply of properties. “Without a doubt,” he said. “Without a doubt.”