The number of California homes purchased with cash and no mortgage financing reached a record high in 2012, according to a real estate information service. REALTORS® attribute the rise in cash sales to stricter lending standards, low inventory, and keen interest from investors.
Information from DataQuick shows a record total of 145,797 condos and houses were bought with cash in the state last year, up from 125,812 in 2011. This is a contrast to when cash sales totaled just 39,731 in 2007. Cash purchases accounted for 32.4 percent of the state's overall home sales last year, an increase of 30.4 percent from the previous year 2011.
Carolyn Miller, president of the Silicon Valley Association of Realtors, says cash buyers made up one third of her business last year. She noted not all of those paying cash are buyers from abroad. Other buyers either saved or inherited money and preferred to pay cash, she said.
"With the very low inventory we are having, many see cash giving them an edge, especially when it comes to a multiple offer situation," explained Miller. "Investors are also keen in purchasing property because home prices are still reasonable today compared to when they were at their peak, so they are guaranteed an excellent rate of return."
The median price paid for a California home was $275,000 in 2012, up 10 percent from $250,000 in 2011. The median peaked at $469,500 in 2006, and bottomed out at $245,000 in 2009, according to DataQuick.
Southern California had the highest year-over-year increase in the number of homes purchased with no mortgage financing. The two communities with the highest cash purchase rate were Laguna Woods in Orange County, with 74 percent of the homes sold going to cash buyers, and Indian Wells in Riverside County, with 71.6 percent of homes purchased with all cash.
In the Bay Area, the number of homes bought with cash was up 17.7 percent in 2012 from the prior year. Marin County had the largest increase in cash purchases, 54.1 percent, followed by the counties of Napa, 38.4 percent; San Francisco, 32.4 percent; Sonoma, 24 percent; Alameda, 17.6 percent; Santa Clara at 17.1 percent; San Mateo, 15 percent; Solano, 10.7 percent; and Contra Costa, 9.9 percent.
Miller worries that the market situation is squeezing out first-time home buyers. "My buyers have been shut out because they are obtaining mortgages. These are families that want to buy a home - the house, the neighborhood, join in with neighbors and live there to have and nurture their children, to live the American dream. Cash buyers purchase property for investment. Families put down long-term roots," says Miller.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.