Cash is king in real estate right now. In March, 35% of all existing home sales were from buyers who paid in all cash, according to a report out last week. That’s a new record.
After stumbling in February, existing home sales increased 3.7% in March from the month before (but were down 6.3% from March a year ago), according to data from the National Association of Realtors.
Perhaps even more interesting is that 22% of March sales were to investors – an increase from the previous month and year.
This news is a tad bittersweet. As I’ve noted before, there’s a lot of opportunity out there right now for investors. But, you’ve also got to figure that a portion of these sales to investors presumably will be coming back to market at some point. These homes – likely rehabs or flips – will add more inventory to the market, which could further pressure prices.
The National Association of Realtors’ Chief Economist Lawrence Yun is pretty optimistic about the state of housing right now. With the latest data, he points out that sales have risen in six of the last eight months. But, the national median price is still falling at $159,600 in March (down 5.9% from the same month last year). Distressed homes, which typically are sold at discounts, made up 40% of the market in March, up from 39 percent in February and 35 percent in March 2010.
These numbers are not horrible. They’re far from cartwheel-worthy, but also not bad. What worries me most about the housing market these days are actually the numbers and factors outside of home sales stats:
- Rising gas prices
- The national deficit (and prospect of further budget cuts)
- Proposals to further restrict mortgage lending
These are all things that could trip up a full housing recovery – or continue to prolong it. So, am I optimistic about the state of housing and the state of “all-cash” deals? Well, I think we have an OK market right now at the national level. But I like to remind myself and others that real estate is local and as such, some markets are doing well while others aren’t.
The fact that there are so many cash deals happening right now tells me that investors still have confidence in real estate. And that’s a good thing.