Cash Buyers Create Home Buying Competiton in the DC Metro

If you are planning to buy a home in the DC Metropolitan area, be prepared for competition! It is not unusual to find yourself in a bidding war for the most desirable homes in the popular neighborhoods of D.C. and the surrounding suburbs. The strength of D.C. Metro real estate is evident throughout Montgomery County and is robust in communities such as Bethesda and Chevy Chase.

Home inventories are low, and buyer demand for DC Metro area real estate will likely remain strong in the upcoming year.

There are three basic reasons for the lack of homes on the market:

1. Sellers are waiting for higher prices, and in some cases to recover equity.

2. The “shadow inventory” of foreclosed homes did not manifest.

3. Cash buyers/investors are scooping up homes.

DC Metro area real estate   is not alone in this environment.  Industry analysts reviewed cash buyers and market impacts during the “Changing Dynamics of Recent Home Buyers and Sellers” session at the 2012 REALTORS® Conference and Expo. This is how Lawrence Yun, Chief Economist for NAR, summed it up: “We’ve seen a tremendous increase in cash buyers since the housing downturn that we haven’t seen before in history.”

Yun explained that a decade ago, cash home purchases were less than 10% of the market. They have increased steadily since 2008, amounting to 30% of all home sales.

Why are so many home buyers offering cash, and who are they?  Yun said the increase in cash buyers reflected tight lending conditions and increased investor sales. Investors account for the majority of cash sales.  Also, increases in the number of international buyers added to the rise in cash sales. NAR research shows that 62% of international buyers purchased U.S. homes with cash; this percentage has continually increased since 2007.

Another group of cash buyers are domestic homeowners with equity, who generate enough cash from the sale of their home to pay all cash for the purchase of their new home.

Only 1 in 10 buyers used stock sale proceeds or 401k funds to purchase a home, nixing the theory that these investments are being liquidated in favor of the housing market. In some cases it may be true, but it is not a widespread strategy.

Buyer competition has helped reduce the time a home spends on the market. The shrinking inventories have buyers looking at fewer properties before making an offer. NAR research shows that buyers looked at an average of 10 homes before making a purchase in 2012.  A year ago, they looked at 12 homes.  Some markets are picking up speed faster than others, but the trend towards less looking and more buying is widespread.

As your Accredited Buyer Representative, I understand how frustrating it can be to see “accepted offer” and “sold” on the homes that interest you. In our market conditions, it pays to be among the first to find out about new listings! Performing DC Metro home searches on the Internet  is a good start, but serious home buyers can gain the advantage by working directly with a Buyer Agent.

Why not have a real estate expert on your side? Contact me for the latest home sale statistics, market trends, and the professional guidance you can trust. My team and I deliver the reliable information and high quality service you deserve. Let us help you with your DC Metro home buying goals!

Melinda Estridge
The Estridge Group-Long & Foster Real Estate, Inc.
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