Types of buyers

Buyers in several real estate markets around the country need cash to purchase a home. According to RealtyTrac, 58% of home sales in Nevada for the month of June were closed with cash.

All-cash deals in Florida accounted for 57% of home sales in June. In New York cash sales comprised 51% of home closings and in Vermont cash sales comprised 80% of the transactions.

Remaining foreclosure properties and depressed home prices are luring private equity firms and other investors trying to purchase homes before prices go higher. Cash sales are lower in markets having fewer distressed properties. Cash transactions across the nation accounted for 30% of home sales in June. This is down from 31% when compared to June 2012. RealtyTrac reports that cash sales in New Mexico, Utah and Texas were “practically non-existent.”

Atlanta, having the highest foreclosure rate in the country, is still being targeted by investors. In this city, cash deals represented 42% in June and investors represented nearly one-third of buyers, which is the highest ratio in the country. In Florida, there are other “metros” that ranked higher than Orlando in cash sales (53%). Miami reported that 64% of transactions were cash and in Tampa they accounted for 58% of home sales.

According to the National Association of Realtor’s Investment and Vacation Home Buyers Survey, investment buyers plan to hold properties purchased in 2012 for a median of eight years. The median investment for home prices in 2012 was $115,000. The median age of investment homebuyers in 2012 was 45. Also, approximately 50% of investment buyers paid cash for their properties in 2012 and 47% of investment homes purchased last year were distressed properties.

What does this mean for first-time buyers? Since the downturn in the real estate market, first-time buyers exited the market. But now, with low interest rates and more affordable home prices, they are coming back.

In 2005, 13% of home owners across the nation were less than 35 years of age. These buyers only accounted for slightly over 10% in 2011. Understandably, Greenwich has always had a low percentage of first-time buyers. In 2013, first-time buyers in Greenwich were 3% of the market as compared to 10.4% in Norwalk and 11.3% in Stamford, according to the Census Bureau. First-time buyers are forecasted to buy more homes in the future.

Coming up with the down payment for a house is the challenge for first-time buyers. According to a poll this spring, 45% of renters said they are struggling to provide the necessary down payment for a home.

Another challenge for potential homebuyers is income. In the United States, incomes remain lower than before the economic downturn.

Real median household income increased 0.7% in June as compared to May. The median income of $52,098 is higher than this year’s low level of $51,422 in February. However, the current median income is 8% lower than the median income of $56,648 back in February 2002, according to the Census Bureau.

Lower median income, problems saving for a down payment on a home, and stricter loan requirements continue to make home buying more challenging. Retiring baby boomers are selling their homes and purchasing smaller homes with cash to minimize their expenses. These buyers are also seeking distressed properties to make the most of their funds.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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