Homeowners Increasingly Using Cash When
Buying a New
Home, Latest HousingPulse Survey Finds
WASHINGTON, DC (February 27) – Current homeowners looking to downsize,
upsize or relocate are increasingly using 100% cash to purchase a home,
according to the latest results of the monthly Campbell/Inside Mortgage
Finance HousingPulse Tracking Survey.
Despite near record low mortgage rates, homebuyers are finding it very
advantageous in the current housing market to shop with cash. And low
returns on money deposited in banks as well as mortgage approval hassles
also are pushing homebuyers to consider all cash transactions.
Between last October and January, the use of cash by current homeowners
purchasing a new principal residence surged from 25.8% to 29.0%. In
contrast, the use of cash by investors and first-time-homebuyers
remained nearly flat over the same four-month period.
If the use of cash continues to grow at this same rate, nearly half of
current homeowners will be using cash to purchase homes by the end of
The strong increase in cash purchases occurred during the same period
that the Federal Reserve announced interest rates will remain low for
several years. "Both mortgage rates and certificate of deposit rates
have been very low for some time now," said Thomas Popik, research
director for Campbell Surveys. "But when the Federal Reserve explicitly
said that bank rates will remain low for several more years, I think a
lot of affluent homebuyers just threw in the towel and decided to use
Recent HousingPulse survey results have suggested that all-cash buyers
can get discounts of approximately 10%, as compared to
homebuyers with mortgage financing contingencies in their offers. All
cash offers are an especially powerful way to get discounts when buying
distressed properties such as foreclosures or short sales.
The total proportion of distressed property closings, as represented by
the HousingPulse Distressed Property Index (DPI), continued at a high
level of 46.8% for January, using a three-month moving average. This is
the 25th month in a row that the DPI has been above 40%.
Hassles with slow underwriting, often accentuated by tardy appraisals,
cause some homebuyers to give up on mortgages. “It is taking about 60
days to close a ‘non-troubled’ FHA loan. About 30 days longer than
usually a year ago. Fannie/Freddie loans about 45-60 days,” reported a
real estate agent in Texas. "Appraisals are holding things up. Even a
RUSH order takes over two weeks," complained an agent in Florida.
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey
involves approximately 2,500 real estate agents nationwide each month
and provides up-to-date intelligence on home sales and mortgage usage
For more information on the survey, contact John Campbell at Campbell
Surveys at (202) 363-2069 or firstname.lastname@example.org.
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