The cash buyers today mean that all is not well in the housing
market, said Clifford Rossi, finance professor at the University
of Marylands Robert H. Smith School of Business.
First-time home buyers should make up 40 percent and were not
seeing it because of mortgage rules.
No - you're not seeing it because the US no longer has a middle class.
The first-time home buyer is living in your basement. And until the bum
moves out and gets a job and STARTS A FAMILY / HOUSEHOLD, he'll never be
a home buyer.
"All Is Not Well In The Housing Market" As All Cash Buyers Double
In Past Year, Hit Record High
Confirming and continuing a trend we first described a year ago,
overnight RealtyTrac reported, as part of its Q1 institutional investor
and cash sales report, that the percentage of all-cash buyers has soared
in the past year with "42.7% of all U.S. residential property sales in
the first quarter were all-cash purchases, up from 37.8% in the previous
quarter and up from 19.1% in the first quarter of 2013 to the highest
level since RealtyTrac began tracking all-cash purchases in the first
quarter of 2011."
Curiously this is happening as institutional investors, think
Blackstone, are slowly exiting the market: "Institutional investors
entities that have purchased at least 10 properties in a calendar year
accounted for 5.6 percent of all U.S. residential sales in the first
quarter, down from 6.8 percent in the fourth quarter of 2013 and down
from 7.0 percent in the first quarter of 2013 to the lowest level since
the first quarter of 2012."
===========Strict lending standards combined with low inventory continue to give
the advantage to investors and other cash buyers in this housing
market, said Daren Blomquist, vice president at RealtyTrac. The good
news is that as institutional investors pull back their purchasing in
many markets across the country, there is still strong demand from other
cash buyers including individual investors, second-home buyers and
even owner-occupant buyers to fill the vacuum of demand left by
While the institutional investor purchase share declined in the first
quarter in 18 of the top 20 markets for institutional investor share a
year ago, home prices continued to appreciate in most of those markets,
albeit at a slower pace in many cases, Blomquist continued. There are
a couple notable exceptions that could be cause for concern:
Jacksonville, Fla., where the institutional investor share of purchases
was down to 13.5 percent in the first quarter compared to 18 percent a
year ago and where median home prices decreased 1 percent from a year
ago in March after 15 consecutive months of annual increases; and
Greensboro, N.C., where the institutional investor of purchases was down
to 6.4 percent in the first quarter compared to 10 percent a year ago
and where median home prices decreased 8 percent from a year ago in
March following 14 of 16 months were median home prices increased
Or, in other words, the smart money is fading the market as the last
flippers scramble to pick up the pieces. And while one can debate the
mix composition and what it means for future trends, one thing is clear.
============The cash buyers today mean that all is not well in the housing market,
said Clifford Rossi, finance professor at the University of Marylands
Robert H. Smith School of Business. First-time home buyers should make
up 40 percent and were not seeing it because of mortgage rules.
Actually we're not seeing it because US consumers are unable to chase
home prices into the stratosphere and instead have opted to rent, as all
the recent data has confirmed, and as even Jeffrey Gundlach confirmed
recently with his bearish call on housing.
However, while the market reserved for the US middle class is
floundering, one segment is still vibrant - that segment which allowed
foreigners to launder their money with US real estate.
============"In Manhattan, you have foreign buyers coming in and using properties as
a second, third, fourth or fifth home and hedging risks in their home
countries, said Chris Mayer, a real estate professor at Columbia
University Business School in New York.
And as long as the NAR continues to be exempt from anti-money laundering
requirements, as Zero Hedge also described well over a year ago, this
explicit money laundering will continue unabated. Them, and hedge fund
managers still riding on the wave of Fed generosity of course:
============In Manhattan, buyers are using cash for trophy apartments and to gain an
advantage over borrowers who must depend on loans to finance a purchase.
Pej Barlavi, owner of brokerage Barlavi Realty LLC in Manhattan, said
three of his five current clients buying homes prevailed with all-cash
Barlavi said two of them are hedge fund managers who used year-end
bonuses to buy the properties: a $2.2 million two-bedroom apartment in
Midtown, selling for $150,000 above the asking price; and $1.5 million
for a one-bedroom in Tribeca. His client in the second transaction was
nudged higher by a foreign buyer before being chosen by the seller,
Bottom line: in the Miami area, 67.1 percent of sales were cash deals;
New York posted 57 percent; Detroit recorded 53.5 percent; Atlanta had
53.2 percent, and Las Vegas posted 52.2 percent.
Needless to add, with risk momentum still up as the global central banks
continue to pump liquidity into the system at an unprecedented pace, the
trajectory of all cash transactions will keep rising until inevitably it
approaches 100%, if not for the entire country, then certainly for the
abovementioned key markets. At that point, US housing will be nothing
but a flippers game as the ultra-rich merely flip properties from and to
each other at an ever faster pace.
Just like stocks.