Will cash buyers bail out the real estate market?
I wouldn't bet the house on it.
Yes, there certainly seem to be many more cash buyers out there than before. The Globe and WBUR both recently did pieces on this - more than a third of all home and condo sales across the state so far this year have been cash deals.
Yet with home sales across the state having fallen to anemic levels and banks skittish, it may also be the case that cash buyers are among the last guys standing here. (Thanks to Markus for this common sense observation.)
Yes, the cash buyer may be king now, but the realm is shrinking fast.
Here's a revealing stat. In 2004, as the housing bubble was reaching its peak, there were 50,561 homes sold across Massachusetts. But by 2010, that number had plunged by more than 25 percent, to 37,326, according to the Massachusetts Association of Realtors.
My hunch is that more than just our incredibly shrinking real estate market is at work here - there is also a surge in speculative buying of the kind that always takes place in the wake of a market crash, whether on Wall Street or Main Street.
But it's a phenomenon that appears to be focused on the very high end and low end of the markets - think downtown Boston condos and foreclosed Dorchester triple-deckers.
As I blogged here 18 months ago, a large chunk of downtown Boston condo sales are now all cash deals.
The suburbs, which have been a rising tide of foreclosures - though still not anything like the mass distress that has hit poorer, urban areas - are also likely seeing, to a lesser extent, more cash buyers.
After all, investors snapping up foreclosed homes typically pay in cash.
But while cash may be cool right now, it is not going to be the savior of the real estate market. For most middle income buyers, getting a bank mortgage is still the only viable route to buying a home, provided they can save up for the hefty down payments many lenders now require.
So what's your take? Do you have the cash on hand to go out and buy a home and simply ditch the mortgage?
