Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

All-Cash Purchases Reign in Distressed States

Written by Than Merrill

All-cash purchases, as they pertain to the acquisition of real estate, continue to make up the majority of offers in states with distressed markets. Those markets that are comprised of high foreclosure rates and depressed home prices are being targeted for their value. Conditions are allowing private equity firms and like-minded investors to acquire properties with minimal cash out of pocket. According to RealtyTrac, investors are looking to buy before prices get any higher.

To better understand the rate in which all-cash buyers are acquiring properties, RealtyTrac compiled a list of the top cities where cash is prevalent. The following list represents the top ten cities that witnessed the most all-cash purchases in the housing sector:

  • Miami (64%)
  • Las Vegas (62%)
  • Tampa (58%)
  • Detroit (56%)
  • Orlando (53%)
  • New York (49%)
  • New Orleans (43%)
  • Memphis (43%)
  • Jacksonville (42%)
  • Atlanta (42%)

In June, 58% of the sales in Nevada were made with all-cash purchases. However, Nevada is not the only state seeing this upward trend in all-cash transactions. All-cash purchases in Florida comprised 57% of home sales during the month; in the state of New York, it was 51%, and in Vermont, a staggering 80%.

With that being said, all-cash purchases are not nearly as popular in states where foreclosure rates are lower and prices are higher. Subsequently, all-cash sales made up just 30% of the entire housing sector in June. This number actually represents a one percent decrease from this time last year.

“The U.S. housing market is slowly but surely moving toward a more normalized and sustainable pattern after a flurry of institutional and cash buyers flocked to residential real estate last year, pushing up prices and picking clean the best inventory available in many areas,” said Daren Blomquist, vice president at RealtyTrac.

As perhaps the most desired market for investors, Atlanta continues to remain burdened by one of the highest foreclosure rates in the entire country. As a result, investors represented 27 percent of the city’s buyers. All cash transactions were then accountable for 42 percent of sales in June.

By comparison, Phoenix was one of the first cities investors began to take a significant interest in when the bubble burst. As little as a year ago, wealthy investors acquired 25 percent of all homes sold in Phoenix. As of June this year, investor participation dropped to 13 percent. As homes became harder to find, prices started rising.

“Prices in Phoenix are just too high now,” said Tanya Marchiol, founder of Team Investments, a real estate investment firm based in the area. “Last year, I could buy a foreclosure, needing just new carpeting and a paint job, for $80,000, put $5,000 into it, and flip it for $120,000.”