Tuesday, March 29, 2011

Cash-Paying Vultures Feast on U.S. Housing as Mortgages Dry Up

More on the interesting phenomenon  where the cash purchases are 30% of the market.  Is this sustainable?
As lenders tighten mortgage standards and consumers stay on the sidelines amid a five-year slide in home prices, all-cash purchases are surging. The deals are done mostly by investors who can get properties for less than buyers needing loans, fix them up and resell or rent them.
“If there weren’t vultures out there, you’d have a city of dead carcasses,” Robert Theocles, an independent consultant for Fort Lauderdale, Florida-based Delavaco, said in a telephone interview. “It’s like the circle of life.”
Here are the main areas where it's happening.
Cash sales in those cities -- as well as in Chicago, Cleveland, Los Angeles, New York, Seattle, San Francisco and Washington -- rose to 199,557 homes last year compared with 138,888 in 2004, according to a March 21 report co-written by Chang. Short sales, where the bank accepts less than the principal on a loan, and foreclosures accounted for 59 percent of last year’s cash sales, up from 10 percent in 2004, Morgan Stanley reported.
Cash buyers paid an average $81.83 per square foot for foreclosed properties in the 10 cities last year, 36 percent less than distressed properties bought with a mortgage, the report said.
Read it all

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