Record number of people buying homes with cash
People are buying homes with all cash in record numbers. 32.4 percent of California's home sales last year were all cash deals.
In the Bay Area that means about 26,000 homes out of nearly 146,000 purchased statewide were done with no financing. And as one might imagine, this is changing how homes are sold in the Bay Area.
Cash is great for the seller, even good for the buyer if you can swing it. But for all the people out there using financing to purchase a home, well they're having a really tough time competing with cash.
Joe Camicia has lived in his Foster City townhome for two years, and is ready to buy a home in the South Bay. He's been house hunting for seven or eight months and has taken all the right steps to purchase a home. He even has his 20 percent down payment. But the four or five offers he's made on properties have been rejected. And it turns out, cash is key.
"The selling agent actually told us that we had a higher overall offer, but they actually accepted an all cash offer because it was close enough and they wanted to quick close and all that," Camicia said.
"It's a new phenomenon that we have here that we're facing," said Carl San Miguel, president of the Santa Clara County Association of Realtors.
He says there's been an increase in cash buyers in the Bay Area over the last several months.
"It's not just first time buyers in the $400,000 range, it also affects the mil and a half, two million range," San Miguel said.
Sellers like cash because there's less risk the deal will fall through.
"If you have a property that's listed and you have 20 buyers that submit offers on it, they're going to go with the least resistance," San Miguel said. "And usually least resistance is cash."
It used to be downsizing empty nesters who paid cash. But now other buyers are finding ways to come up with the money.
"Sometimes they get money from relatives and all that and make it a cash deal and then do a re-fi after the escrow closes to pay back the individuals that they borrowed money from," San Miguel said. "
There's also stock money.
"People are getting stock options and they're using them, so that's some newfound money and they're being creative with it and they're making those offers," San Miguel said.
Camicia says for him, paying all cash just isn't an option, ""Absolutely not, not here. Maybe somewhere where home prices are a lot less but not here, not in the Bay Area."
But it's not all bad for Camicia. A few days ago, his offer on a short sale was accepted. The house is in the same area of San Jose that both he and his father grew up in.
Now of course a short sale isn't a done deal, but things are looking good for Camicia.
If you are financing, San Miguel says to make sure you have everything in order, just like Camicia -- the prequalification, the down payment. And he says that sometimes it helps to write the seller a letter, because sometimes they just want a nice person or a nice family to move into their home because they care about the neighborhood.
foster city, san jose, housing market, stocks, mortgages, economy, business, ama daetz
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