Chicago, IL (PRWEB) June 24, 2014
Mortgage-dependent home buyers who have been boxed out of the market by investors and other consumers with cash offers are seeing the competition thinning, which is good news for lenders such as The Federal Savings Bank.
According to a recent June 19 Zillow report titled "Share of All-Cash Home Purchases Falls in Most Areas", all-cash sales dropped year over year in the first quarter of 2014. The online real estate marketplace tracked a total of 126 metro areas, and 102 saw declines in their share of cash buyers. While the Florida and Midwest locations had a strong showing, weaker activity was seen in West and Mid-Atlantic metro areas. As a few investors are still trying to net a good deal, most all-cash sales activity was in the lower-priced markets.
"Even as the share of all-cash sales falls in many areas, it's pretty clear that cash is still king, especially at the lower end of the market," said Stan Humphries, Zillow chief economist.
Among the 30 largest metro areas, Miami had the most significant share of all-cash sales in the first quarter, at 64.9 percent. This was not far off the city's peak of 71.2 percent, which was set in the first quarter of 2012. In the lowest price tier, 84.7 percent of home sales were made with cash.
Virginia Beach, Virginia, had the lowest level of all-cash sales activity among the 30 largest metro areas. Only 17.4 percent of transactions were cash purchases, well below the peak of 67.8 percent that was notched in the first quarter of 2013. Only 28.4 percent of the most affordable homes were paid for with cash. All cash sales in Chicago, where The Federal Savings Bank is based saw that only 40.9% of sales are cash based in Q1 which is down from the city’s peak of 45.9% in Q1 of 2013.
Rising prices create a boon for buyers
The Federal Savings Bank explains that as investors are trying to turn a profit, consumers who are funding a home purchase with a low cost mortgage are more concerned about finding a home for their family and building equity. As a result, many mortgage-dependent buyers are not deterred by the price increases seen during the housing recovery.
Black Knight Financial Services recently released a report on June 23 titled "Black Knight Home Price Index Report: April 2014 Transactions" that national home prices are only 12 percent away from reaching their peak set in 2006. In April, the firm's Home Price Index was at $236,000, a 0.9 percent gain from the previous month and a 6.4 percent increase compared to April 2013. As it becomes more expensive to buy homes even in the lower-priced markets, investors have been bowing out, giving way to other buyers. Humphries said this is not only beneficial for consumers, who have a hard time competing with investors when inventory is tight, but it also helps the housing market overall.
"Housing is much more than an investment for most buyers, and it's heartening to see more buyers armed with traditional financing begin to enter the market," Humphries said. "This is a critical step on the way back to a more normal, balanced housing market."
Contact The Federal Savings Bank, a veteran owned bank, for information mortgage options that can get you closer to a new home purchase.