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Half of home sales are all-cash

By Judy Martel · Bankrate.com
Thursday, August 22, 2013
Posted: 5 pm ET

Rising mortgage rates aren't deterring a majority of homebuyers in the marketplace. According to an analysis by Goldman Sachs Group, more than half the homes sold last year and so far this year have been all-cash transactions.

first-time-homebuyer-mistakes-to-avoid-5-savingsAccording to the analysis, published in The Wall Street Journal, an estimated 20 percent of homes sold before the housing market collapse were all-cash sales. But over the past seven years, that share of sales has been increasing.

Many of the buyers are investors taking advantage of the still-low home prices with the goal of unloading the property quickly as the market improves. "Given the low interest rate environment that has many investors sitting on cash that is literally earning next to nothing, the prospect of parlaying that cash to scoop up real estate at bargain prices -- while avoiding the mortgage process -- is pretty attractive," says Greg McBride, senior financial analyst at Bankrate.

McBride adds that over time, as credit standards loosen up, buyers with an appetite for investment properties and vacation homes will begin financing again.

Buyers who finance can still take advantage of the mortgage tax deduction, but McBride says whether Congress will eventually eliminate or reduce the deduction is a "wild card" in assessing the future mortgage market. "The mortgage tax deduction further reduces the net borrowing cost, making a mortgage an attractive alternative to liquidating other assets," he says. "But should the mortgage tax deduction be limited or go away entirely, this will alter the appeal of mortgage financing for buyers that can otherwise pay cash."

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7 Comments
wiseowl
November 04, 2013 at 2:34 pm

A roof over your head is a privilege. Homeownership is not.
I laugh every time I read one of these stories and the comments after that call the banks "greedy" predators who want to "steal" homes away from people.
Blame our government! Under both Republicans and Democrats the U.S. government has banged the drum of "homeownership is a right!" Buy a house! Buy a house even if you can't afford one! Buy a house even if you don't have a clue how to take care of one! Just buy a house! We'll help you. We'll let you borrow withou escrowing property taxes or insurance - just so you can lose your house 5 years from now for not paying your property taxes. Oops! I slipped there and revealed a big problem.

Just for You
September 04, 2013 at 2:29 pm

I am a homeowner and to tell You the truth it is not as great as it is cracked up to be. If something breaks, falls off, wears out or just needs to be fixed,repaired or replaced there is no land lord with magic wand to make it happen. I personally would not do this ever again renting is the way to go. I know there is slum lords that only want money not keep up property but You have the option to just move out. Maybe if the American Dream was a little clearer then I am sure less would want a part of it. gwjohnson, I would see if they would give Me an asking price for it, 10 years is not that long to mortgage companies most people do not start paying principal til 15th year. I wish you the best of luck on this though. I would try to get the names of investors and make them a deal before letting bank take it all. If no way to do this Post a Sign on side of house For sell by Owner!:)

Kay
September 03, 2013 at 9:31 am

The scheme is to keep people in mortgages for a lifetime and the out is turning it over to them and taking your peace of mind with you. Paying higher rates than are unfair is robbing you too. The joke is on companies (like Wells Fargo) in fraud in most states. If this is what it takes to gain then take deserving prison time. Those who value their freedom will live in the free world.

marie.johnston@bellsouth.net
August 24, 2013 at 3:05 pm

IMPORTANT INFO!

earl
August 24, 2013 at 11:16 am

I agree, but first they wait till you have lots of equity, then try to lure you in with a HARP, even though with your LTV ratio you don't qualify for one. Then they play a shell game with you. Many of us who have done our research or have been advised by people with a conscience refuse to fall for this scheme and will continue to pay high interest rates rather than deal with untrustworthy lenders that are still not fully regulated like they should be.

gwjohnson
August 24, 2013 at 6:07 am

Banks and investors are stealing homes. Banks refused to work with the current owner because the investor have a bag of cash to purchase underwater homes. Owners like me that paid their mortgage for over 10 years and due to illness, decrease in income, death of partners etc. My bank TCF didn't works with the federal or state programs, so TCF can refused to work with me to save my home because of $$$.