How Buyers Pay for Homes

I came across a headline, “All Cash Buyers Dominate Florida and Midwest.”  Really?  I’m thinking you’ve got to be kidding.  I mean, who has cash to buy a new home outright?  Turns out, there’s more of that going on than you might imagine.  From 32% in Chicago, to 45% in Cleveland, 31% Nashville, to 42% of Orlando home sales and 54% of Miami’s!  That’s a lot of cash sales.  For sure, those aren’t the result of a tidal wave of working stiffs all of a sudden becoming ultra savers and stockpiling cash for down payments.  Nor have multitudes won the lottery of late.  No, a very large percentage of these purchases arose as a result of the Fed’s easy money policies.  Basically, the money moved from the Fed to the big banks, and from there to hedge funds- all at ultra low rates (like lower than anything you or I have ever seen when taking out a mortgage).  The hedge funds then bought up the bulk of the foreclosures at rock bottom prices along with some other good deals, and converted these to single-family rentals.  They’re now the biggest landlords in the country.  And the infusion of these outside funds into the home market has pushed prices higher and higher.

Here in Indianapolis the story has taken a different twist.  The percentage of cash buyers actually decreased this past year, from 26% to 22%.  I guess we must not be as attractive a marKket as some of those other places.

Meanwhile, the rest of us have bought homes the old fashioned way- with a mortgage.  Most recently, 46% of local buyers used a Conventional mortgage.  21% took out a FHA mortgage.  (That number actually surprised me as I would’ve guessed it to be higher in this market.)  Just 5% used a VA mortgage, and even fewer RD or contract financing.

If you have questions how financing might help you buy or sell a house… call, text or write.  I work harder to make good things happen!

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