Realty brokers are quick to observe that in today's housing markets, "Cash is king."
In fact, given the rise in the proportion of all-cash home purchases, it might be fair to say cash is not only king, but the whole royal family.
During the housing boom, buyers wanted no-money-down mortgages, which allowed them to buy homes with no cash of their own in the deal. But recent data from the National Association of Realtors suggest that a third of today's deals are exactly the opposite of that: all cash, no loan.
The Mortgage Bankers Association this week reported a surge in its purchase-money index, which tracks the volume of new loan applications to buy a home. But in the prior week, the same index was down almost 20 percent compared with the prior-year period.
Fewer home sales could account for some of that decline. But the perception -- and reality -- that mortgages are difficult to obtain and that cash buyers have an advantage in offer negotiation are part of the story as well.
Brett Sinnott, director of secondary marketing at CMG Mortgage in San Ramon, Calif., suggests a few other factors that also might account for a drop in mortgage applications:
- Investors who've been stockpiling cash are now putting that money into real estate and don't need loans to make purchases.
- Property management firms, subject to caps on the number of real estate investment loans they can get, are using cash from rents or other sources to purchase properties.
- Former homeowners who cashed out before house prices dropped and have been renting are returning to homeownership, reinvesting their equity and no more.
- Lower home prices and a preference for less costly homes help more buyers purchase a home outright without financing.
Cast your ballot: Cash or financing?
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