Numbers Count: Cash is no longer king

Posted By Stew Larsen In Your Home | No Comments

Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.

The numbers: Dip in cash sales continues

Large 2-story home for sale with large green front lawn. [1]Cash sales made up 38.9% of home sales in January, down from 41.4% in January 2014. The year-over-year share has fallen each month since January 2013, making January 2015 the 25th consecutive month of declines, according to the latest data from CoreLogic [2] released April 9. The cash sales share peak occurred in January 2011 when cash transactions made up 46.5% of total home sales in the United States. Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25%. Should the cash sales continue to fall at the same rate that it did in January 2015, the share should decrease to 25% in mid-2018.

What counts: Cash sales remain high compared to historical trends, but they are on a steady decline. Fewer cash buyers is usually welcome news for potential mortgage borrowers who may feel all-cash offers appear more appealing to sellers. Fewer cash buyers may also mean less competition this homebuying season. You still want to be prepared to make your strongest offer. Here are some things to consider:

1) Work with a reputable real estate agent who can advise you on the market.

2) Get preapproved for a mortgage. A preapproval letter from a lender helps document your finances and may take some of the worry out of the process for you and the seller. A preapproval letter may strengthen your offer by helping assure the seller that you have funds for the down payment and that you are working with a lender prepared to process your mortgage application.

3) Consider a letter to submit with your offer introducing yourself and why you like the property or the neighborhood. An heartfelt appeal may not trump cold hard cash, but some buyers overlook the value of a well-thought-out letter. Sellers who are long-time homeowners often want to pass the baton to new owners who resonate with them. Maybe you lived in the neighborhood previously, or maybe you want that grassy backyard for your kids to grow up in. Little details about you and your interest in the home may help round out your financial offer.

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