Cash is king in housing
By Matthew Goldstein
It’s no secret that housing in the U.S. has become an investors market, especially if it’s an investor with cash to burn.
For more than a year now, we and just about everyone else in the financial media have been writing about how Wall Street-backed firms are looking to buy-up the wreckage of the housing bust on the cheap and rent out those homes until the time is right to sell them for a sweet profit. And it should come as no surprise that much of that buying is being done with cash because it’s the easiest way for an investor get a deal done quick.
Recent stats from the National Association of Realtors shows that 32 percent of all single family homes in the U.S. are being bought with that cash. But that’s not just foreclosures; it also includes homes listed by brokers. It’s a testament to how much money institutional investors like Blackstone and American Homes 4 Rent have been able to raise from high-net worth investors and others. all of whom are chasing yield in this low-yield world.
To be sure, the all-cash buying isn’t a new phenomena and actually predates the appearance of the big institutional buyers in the market for distressed homes. Back in early 2009, the NAR reports that 30 percent of all purchases were being done in cash–no doubt that was a lot of early foreclosed home speculators, including the more traditional mom-and-pop buyers/landlords.
Historically, all cash buying has ranged around 15 percent of so. But with the Wall Street-backed firms showing no sign of turning back from building out their big portfolios of homes, expect the cash to flow freely in the housing sector for another year or two.