Sunday, May 15, 2011

37%+ of area housing sales are now cash

With home prices low and financing options slim, the number of buyers purchasing homes in Tucson with cash has been growing steadily.

Through the end of April, more than 37 percent of this year's home sales have been cash purchases, statistics from the Tucson Association of Realtors Multiple Listing Service show.

In contrast, about 13 percent of units sold in 2007 were cash transactions. Since then, there have been steady year-over-year increases in cash sales.

Some of the sales are to out-of-state or international buyers who have saved up for second homes or are looking to retire in the sun-drenched Southwest, local real estate agents say.

With the credit market tight, these buyers sometimes just don't want to deal with getting money from a bank.
"They're people who are in retirement or near retirement and looking for some getaway properties," said Tom Ebenhack of Long Realty.

Those buyers are looking to spend $200,000 to $700,000, Ebenhack said.

Sue Gutierrez, a broker with TucsonREO Realty, said she also has an increasing number of cash buyers. Younger homebuyers are still relying on traditional lending practices, but older buyers are sometimes investing their retirement accounts to make the cash purchase, she said.

Gutierrez said the buyers she's seen often come from outside Arizona, or even outside the United States, and they'll purchase homes ranging in price from $100,000 to $500,000.

On the lower end of the housing market - where foreclosures have drilled prices to new lows - investors are snapping up properties and converting them into rentals.

Homes priced lower than $100,000 tend to get picked up by buyers who have money to fix them up, Gutierrez said.

"They're sitting on them and they're renting them out," she said. "They're holding onto them until the market gets better."
With prices as low as they are, investing in property has become an appealing option for those with plenty of cash in hand, said Luis Carranza, a real estate agent who has been investing in properties since the 1980s.

"People with a lot of money, instead of going to the stock market, they just go and buy houses for next to nothing," Carranza said.

These investors will spend $30,000 to $100,000 on a bank-owned house, pay another $10,000 to fix the property up, and then set a rental rate that allows them to turn a profit, he said.

Sometimes investors will let the property sit vacant, but Carranza, who said he has purchased only a few of the properties in the past year, leases his.

The prospect of flipping houses - buying a worn-out foreclosure, making repairs and selling it immediately - has limited appeal because property values remain so low.

To make money on their ventures, Carranza said, investors will likely have to wait at least a year before they start selling houses. Before the housing boom, few people were interested in bidding on foreclosed houses at auctions, but the proliferation of low-priced, bank-owned properties has ratcheted up the competition, he said.

Josh Myers, another investor, said he used to develop large subdivisions and sell property to national home builders, but that changed when the housing market crashed. He now owns about 100 houses in Phoenix, California, New Mexico and Texas that he maintains as rentals.

Myers doesn't have properties in Tucson because he prefers to invest in markets where housing prices soared higher and crashed harder, but other buyers are active here, he said.

Toward the end of last year, both Tucson and Phoenix saw an influx of investors from Canada, Myers said. Their interest has been driving up prices for bank-owned properties at auctions, he said. "They're buying everything they can get their hands on."

For that reason, Myers said he doesn't anticipate prices on the financially distressed properties dropping that much lower. And if banks loosen up their lending practices, prices could stabilize more, he said.

But even when trying to pick up low-priced homes and turn them into rentals, buying at the right time is still crucial.
Falling home prices began to attract investor interest not long after the market's peak. Some of those buyers, who thought they were buying at the bottom, saw values sink even lower and they weren't able to lease their properties at competitive rates, said Hank Amos, chairman and CEO of Tucson Realty & Trust Co. Some of those properties have begun to cycle back toward foreclosure, he said.

Carranza said he's confident that investors buying now will see prices start to increase.

It could take a year or more, but buyers who pick up financially distressed houses and hold onto them or rent them out will likely see a return on their investment, he said.

prices still down

The median sales price for homes in the Tucson area was 18 percent lower in April compared with a year earlier, two reports say.

Coldwell Banker Residential Brokerage pegged the median at $126,000 in April. Long Realty says the median was $132,000.
Both reports showed a slight uptick in the median sales price - the point at which half of homes sell for less and half for more - compared with March.

by Dale Quinn Arizona Daily Star May 11, 2011

37%+ of area housing sales are now cash

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