In a recent USA Today article it was reported that more home buyers are purchasing properties with cash, largely to avoid paying interest charges on loans and get a higher return on their investment.
The National Association of Realtors reported homes involving all-cash jumped from 18% in January of 2009 to 26% in January of 2010. Of this group, buyers identified solely as "investors" jumped to 17% in January, up from 15% in December and 12% in November.
Mark Fleming, chief economist at First American CoreLogic is quoted in the article as saying "we bottomed out in 2008 and in late 2009 prices stabilized and investors have returned".
As a result many investors see real estate prices as having no where to go but up. All-cash offers give buyers a competitive edge on rival offers that are dependent on financing and cash deals can close faster.
In addition, many prime-rate borrowers bought more expensive homes that have now gone into foreclosure. These home aren't just the 1 bedroom homes in need of high maintenance, but now include split-level and multi-bedroom homes that will appreciate to a higher value.
Will this trend continue? As long as the return on investment continues to outpace more traditional investments there is no reason to believe it won't.
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