Top Markets for All-Cash Real Estate Buyers
Commercial Real Estate
While all-cash offers for residential real estate are not as prevalent as they had been a few years ago, flippers still often use all-cash offers to push their bids to the top of sellers' lists and to land the desired property. With low inventory continuing to affect activity in the housing market, flippers aim to find cost-friendly properties in an increasingly competitive industry. The competition may become more fierce as cash buyers make themselves known in top real estate investing markets across the country.
The National Association of Realtors (NAR) noted that all-cash sales rose in January this year, gaining one percent from December to account for 27 percent of all transactions. Overall, sales of existing single-family homes, townhomes, condominiums and co-ops reached a seasonally adjusted annual rate of 4.82 million in January. While this was the lowest since April 2014, NAR predicts that existing-home sales will heat up later in the year.
The percentage of distressed properties represented in all existing-home transactions remained solid in January from the last month, according to NAR. Of January transactions, distressed properties made up 11 percent of sales, with the majority being foreclosed homes. Foreclosed properties sold at an average 15% discount to market value in January – showing that these properties can still provide opportunity to flippers.
Here are some of the top markets for all cash buyers in the U.S.:
According to real estate data provider RealtyTrac, Florida was the No.1 state for cash buyers between 2011 and 2014. Of the more than 3.95 million single-family home and condo sales in the nation, Florida accounted for nearly 865,000 of them.
As of February 2015, cash buying had not slowed down in Florida. The Miami Association of Realtors recently released a report that found that Miami single-family home sales surged 14.2 percent in February, driven by all-cash buyers, according to the World Property Journal.
All-cash transactions accounted for 58.8 percent of all closed sales in Miami-Dade County in February, continuing the upward trend from January when cash buyers held 57.2 percent. These figures are nearly double the national average of all-cash sales as a proportion of totals, indicating Miami’s unique attraction to international buyers.
While all-cash buying declined in other regions of the country, certain parts of the Golden State, especially in Southern California and the Bay Area, saw tremendous growth. RealtyTrac noted that the Southern California market had 10 zip codes where cash sales made up 50 percent or more of all transactions in the fourth quarter of 2014.
“Ripe institutional funds, foreign infusion and tougher lending laws increased the use of cash purchases as a percentage of total recovery sales,” said Mark Hughes, chief operating officer at Southern California-based First Team Real Estate. “It's natural, though, for institutional investors and other cash buyers to slow down after lower price and distressed opportunity-driven activity realizes a more natural pace, which it has.”
Cash buyers also dominated in Michigan with over 204,000 of total all-cash sales over the past four years according to RealtyTrac. The significant number of distressed properties in Detroit, in particular, make Michigan unique and potentially attractive to flippers. According to real estate property research firm CoreLogic, Michigan ranked second in completed foreclosures for the 12 months ended in February with an approximate 50,000 of such foreclosures.
All-cash home sales in Georgia reached over 175,000 over the last four years, according to RealtyTrac. CoreLogic said Georgia also placed in the top five states for highest number of completed foreclosures, accounting for 28,000 in February. Together, Georgia along with Michigan, Texas, California and Florida totaled nearly half of all completed foreclosures in the U.S. in February.
Arizona had over 170,000 all-cash sales over the last four years of single-family homes and condos according to RealtyTrac. As Arizona continues to attract retirees and other home buyers, flippers may take anticipate continued increased housing demand to rehab and renovate houses in the state.
While Washington did not rank in RealtyTrac's top five list, players in the real estate market tout Seattle as seeing a significant number of all-cash transactions.
“Cash buyers are still king in Seattle; made up primarily by investors at the low end and international home buyers at the high end," said OB Jacobi, president of Seattle-based real estate firm Windermere Real Estate.
Active real estate investors who are in a position to make all-cash offers clearly are at an advantage in many markets. P2P real estate marketplaces such as Realty Mogul can assist flippers in getting prompt answers to financing queries and with quick closing schedules that can help them land their desired properties.
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