Cash is King in the Portland Real Estate Market
Could the Portland real estate market be any busier?
Probably not. While the number of buyers out there may not know a limit, the number of homes available is fairly set. That’s why this month, the RMLS data shows some numbers actually falling — the number of new listings coming on the market decreased from what we were seeing a year ago, and accepted offers are down 9% from March 2015.
This low inventory situation (1.3 months) is a major contributing factor to the rising home prices seen throughout the Portland metro area. The median Portland home price is now up to $315,000, a 9% year-over-year increase. Another contributing factor, of course, is Portland’s current popularity as a place for first-time home buyers to come start new careers, or for retirees to settle into quiet yet lively neighborhoods.
The online newsmagazine Investigate West, however, says that there’s another reason home prices are going up that isn’t a lack of inventory or a flood of new buyers. According to the report, cash is another leading culprit.
In the traditional home-buying market, buyers find a home they love and finance it with a mortgage. In other words, a bank agrees to lend the money to the buyer, who pays the bank back over the course of 15, 20 or 30 years. However, the mortgage can sometimes not come through and the seller is left hanging with a half-finished deal.
That’s why sellers tend to love a cash offer — when the buyer has all the money for the house together and just writes a check to the seller. When there’s more than one buyer interested in a home, the seller will often choose the offer from the cash buyer, even if the traditional buyer offers to pay more. To sweeten the deal, according to Investigate West, many of the new cash buyers are waiving inspections, something the traditional home buyer would never do.
Who can afford to pay cash for homes priced between a quarter and a half a million dollars in the Portland real estate market? Investors, says Investigate West. Private equity firms buy up properties, then sell bonds to investors funded by either renting or flipping the homes. The industry is taking a wider slice of the Portland housing market than ever, according to the article:
“In the greater Portland area (Portland, Vancouver and Beaverton), such institutional investors — buyers of more than 10 single-family homes for cash — bought 6,103 properties between 2011 and the end of 2014, according to data from the real estate information company RealtyTrac. That was nearly 14 percent of all cash sales in the area.”
How can traditional home buyers compete? RealtyTrac has crunched the numbers have found that another 14% of cash buyers are borrowing money from friends and family to pay for homes up front, then paying them back by financing the home after closing. It may be an unconventional tactic, but if that’s what it takes to get the edge on your dream home, it might also be worth it. One thing’s for sure — having a skilled buyers’ agent in this competitive real estate market is the most important thing you can do. Reach out to my top Portland buyer’s team today. We know all the available tricks to beat out cash offers in a hot market.May 6, 2016