Jay's Notes: Cash sales now comprise almost a third of home sales. Even though current financing conditions are providing an historic low cost of debt, many investors are attracted by today's current returns that are now available to more conservative all-cash investors. Foreclosures were a third of all sales a year ago and are now down to 28% of all sales. Even though the economy is soft, real estate has been slowly on the mend. However, investors who are buying the majority of the 29% of the homes that are selling all-cash are the ones that have really been taking advantage of this market. These investors are buying while prices are suppressed, many realizing that when the economy and consumer confidence improves, with many looking carefully at the upcoming elections, that prices may go up as investor sentiment changes overnight, much like what happened to the stock market after March 2009.
Existing-home sales improved in October while the number of homes on the market continued to decline, according to the National Association of REALTORS®.
Total existing-home sales — completed transactions that include single-family, townhomes, condominiums and co-ops — rose 1.4 percent to a seasonally adjusted annual rate of 4.97 million in October from a downwardly revised 4.90 million in September, and are 13.5 percent above the 4.38 million unit level in October 2010.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.07 percent in October from 4.11 percent in September; the rate was 4.23 percent in October 2010.
An ongoing positive trend is a steady decline in the number of homes on the market. Total housing inventory at the end of October fell 2.2 percent to 3.33 million existing homes available for sale, which represents an 8.0-month supply at the current sales pace, down from an 8.3-month supply in September. Inventories have been trending gradually down since setting a record of 4.58 million in July 2008.
The national median existing-home price for all housing types was $162,500 in October, which is 4.7 percent below October 2010. Distressed homes — foreclosures and short sales typically sold at deep discounts — slipped to 28 percent of sales in October from 30 percent in September (17 percent were foreclosures and 11 percent were short sales); they were 34 percent in October 2010.
“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “REALTORS® in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers. In addition, extending credit to responsible investors would help to absorb inventory at an even faster pace, which would go a long way toward restoring market balance.”
All-cash sales accounted for 29 percent of purchases in October, little changed from 30 percent in September and 29 percent in October 2010; investors make up the bulk of cash transactions.
Source: NAR