Home Buyers Get Another Chance

‘Boomerang buyers’ are securing loans despite foreclosures

Four years ago, Dave Peterson was in the worst financial crisis of his life. He was in foreclosure, had declared bankruptcy and was struggling to find a place to rent in Las Vegas because of his terrible credit.


But last year he and his wife, Gabby, bought a $280,000 home that’s bigger than the one they lost.

Peterson is a “boomerang buyer,” one of several million who’ll return to the market in the coming years, real estate experts say, bringing needed muscle to a housing market that seems to be finding its footing.

They are people who lost homes in foreclosures and short sales in the historic housing bust who are striving to be homeowners again. Their time out of the market may be shorter than many Americans might expect. People who go through foreclosure can rebuild credit records and qualify for home loans again in three to seven years if they manage their finances well. With home prices still low and interest rates near record lows, today’s boomerang buyers might find their next mortgage more affordable than their last one.

Boomerang buyers are most prevalent in areas such as California and Arizona that were hardest hit by foreclosures, and their return is contributing to rebounds in those markets. Going forward, growing numbers of boomerang buyers could help offset the expected slackening in demand from investors as home prices rise, says Stan Humphries, economist for real estate website Zillow.

Since 2007, more than 4.7 million homeowners are estimated to have lost homes to foreclosure or short sale. Seven in 10 will return to homeownership within eight years of their short sale or foreclosure, estimates John Burns Real Estate Consulting.

With the start of the housing bust now six years past, this will be the first big year for returnees, accounting for 10% of home sales, up from 4% last year.

They’ll stay at that level until starting to subside in 2016, about eight years after the height of the foreclosure crisis, Burns projects. His firm estimates the crop of boomerang buyers who lost homes in 2007 through 2012 will exceed 500,000 a year in 2013 through 2016.

Already, boomerang buyers are adding up to real numbers in some markets. In Phoenix, one of the areas hardest hit by foreclosures, 40% of Academy Mortgage’s home-purchase customers are boomerang buyers, estimates Chad Melin, Academy’s branch manager in Chandler, Ariz.

In San Diego, such buyers account for 20% of new home sales for builder Cornerstone Communities, says its president, Michael Sabourin. They started shopping in 2011 but didn’t qualify and came back in greater numbers last year. “We really see them today,” he says.

BOOMERANGERS OUT WEST

In Southern California and across the Southwest, almost 14% of new home sales in the last half of 2012 were to boomerang buyers, according to a Burns Consulting home builder survey of 178 builders nationwide. That compares with less than 5% of new home buyers in the Northeast, Southeast and Northwest, the survey shows.

Outside the West, other large cities with many foreclosures will also see substantial numbers of boomerang buyers, Burns says. Those include Atlanta, Chicago, Miami, Orlando and Washington, D.C.

Like Peterson, some have already purchased again. He got his new home loan through the Department of Veterans Affairs, paid no money down and got a 3.74%, 30-year fixedrate loan last April.

Given the 60% drop in Las Vegas home prices from 2006, Peterson now pays $1,600 a month in mortgage costs vs. $3,000 for the smaller house he lost. While his previous house plunged in value with the housing bust, his new house has risen in value, he says.

Las Vegas prices were up almost 13% in December year-over-year, Standard & Poor’s Case-Shiller data show.

“Our development is booming,” Peterson says.

WATCHING THE CALENDAR

Other boomerangers are counting the days until they can buy again.

“They know the exact date they can qualify,” says Dennis Webb, sales executive with Fulton Homes in Phoenix. He says such buyers make up about 20% of Fulton’s Phoenixarea sales. The builder expects to finish 750 new homes this year.

Most of the buyers get loans from the Federal Housing Administration, which requires just 3.5% down payments vs. 20% for many conventional loans.

FHA borrowers can also have lessstellar credit. In January, their average credit score stood at 717 vs. 767 for conventional-loan borrowers, according to data from mortgage tracker Lender Processing Services.

If consumers repair credit, they generally face waits of two to seven years to become eligible for home loans after a foreclosure or short sale. A short sale occurs when lenders allow a home’s sale for less than what’s owed. The FHA wait is three years for either one.

Like Peterson, Hoss and Terri Wylie are homeowners again. A house they bought in 2006 was lost in foreclosure following a job loss. The couple just closed on a $147,000 home in Phoenix, three years after their foreclosure. They got an FHA loan at a 3.55% interest rate.

During their wait, the couple rebuilt their credit score to a respectable 700-plus, from below 500, where it sank after their foreclosure. The Wylies also paid off a $4,700 car loan and $5,000 in credit card debt.

“We just really buckled down,” Hoss Wylie, 50, says.

They, too, have seen their new home rise in value. Phoenix prices jumped 23% last year, S&P data show. “We bought the last $147,000 house” in the neighborhood, Wylie says.

Even after the financial wreckage of a short sale or foreclosure, boomerang buyers say they’re driven to own for the same reasons they bought before. They want their own place. They see it as a good investment.

The rent vs. own equation is also driving homeownership. Nationwide, buying a home is now 44% cheaper than renting in 100 leading metro areas, data from real estate website Trulia indicate.

Helping affordability: interest rates below 4% and home prices still 30% off their 2006 peaks. Rents, meanwhile, have risen 8.3% in the past 2.5 years, Zillow data show.

“A lot of these people are just doing the math,” says Sean Fergus, analyst for Burns Consulting.

Trulia’s rent vs. buy calculation assumes a 3.5% 30-year fixed-rate mortgage, 20% down and seven years in the home.

To rent a smaller home, the Wylies paid $1,000 a month, and that was headed to $1,200 this year, Hoss Wylie says. By owning, they pay $952 a month, which includes all costs, except utilities.

Phillip Greene, 28, did the same calculation.

The Seattle real estate liaison for online brokerage Redfin went through a bankruptcy and foreclosure in 2009 after he lost half of his income because of the real estate downturn. The condominium he bought in 2006, near the height of the market, tanked in value.

Greene rebuilt his credit and now touts a credit score above 680, he says. He secured an FHA loan and bought a $190,000 house in February. He paid $1,600 a month to rent a similar-size house. He’s paying $1,500 a month to own.

“I could buy this house and rent it out for more than my mortgage,” Greene says. “It would be crazy not to buy.”

Yet other former homeowners stung by a foreclosure or short sale have had enough, and three in 10 won’t return to the market, Burns estimates.

Even if they could buy again, some previous homeowners will remain renters.

“There’s a select group of people who’ve said, ‘I’m done with homeownership. I got burned too badly,’ ” Fergus says.

Today’s tighter mortgage credit standards will trip up others.

Last year, new mortgage holders had credit scores that averaged 745, up from 699 in 2006 at the peak of the housing bubble, LPS says.

"Getting a mortgage these days isn't for the average Joe," says Guy Cecala, publisher of Inside Mortgage Finance.

Written by
Julie Schmit

Orange County Active Inventory

Since the start of the year, the record low inventory has only increased by 47 homes. 
The active inventory will not budge. In the past two weeks, it has increased by 25 homes and now totals 3,208. It has been bouncing around the 3,200 market for the first few months of 2013. Since tracking the market nine years ago, these levels are drastically less than the prior record levels established in March of 2005 at 4,912. To say that the current active inventory is low or anemic is an understatement. It is almost impossible to convey just how ridiculously low the levels are for comparison purposes. The inventory is simply unprecedented and does not show any signs of letting up.

Last year at this time, there were 3,407 additional homes on the market and they were flying off the market. With buyers on the sidelines waiting for new inventory to hit the market, pent up demand is astronomical. If there were an additional 3,400 homes on the market today, they would sell almost overnight.

The real issue is that the housing market is in transition across Southern California and across the United States. Distressed homes have faded as the market recovers and more equity sellers place their homes on the market. Thus far in 2013, there have been 1,094 short sales listed for sale thus far in 2013, down from 2,838 during the same timeframe last year; that is off by 1,744. Similarly, there have been 334 foreclosures listed for sale so far this year, down from 1,095 last year, a 761 home difference. The only increase has been in equity sellers. There have been 7,800 homeowners with equity in their homes opt to enter the fray thus far this year compared to 6,604 in 2012. There just have not been enough equity sellers to overcome the loss in distressed listings this year. Overall, there have been 12% fewer homes placed on the market in 2013 compared to 2012.

Demand: With not enough new inventory, demand, as measured by pending sales, dropped by 2%
In the past two weeks, demand, the number of new pending sales over the past month, decreased by a negligible 69 homes, and now totals 2,811. Compared to last year at this time, there are 1,029 fewer pending sales today. Until more homeowners realize how much homes have appreciated and are more apt to sell, demand will remain muted compared to last year. Distressed homes have faded and equity sellers have been slow to replace them.

Distressed Breakdown: the distressed inventory remained unchanged over the past couple of weeks.
Within the past two weeks, the distressed inventory, short sales and foreclosures combined, dropped by 2 homes, virtually unchanged, and now totals 224. Only 7% of the active listing inventory is distressed and 18% of demand. Compare that to last year when it represented 28% of the inventory and 49% of demand, more proof that the market is in transitioning away from distressed sales having such a tremendous impact on housing.

Written by,

Steven Thomas

HOMES FOR SALE IN LOW SUPPLY

As spring buying season starts, prices likely to keep rising

The supply of homes for sale is still unusually tight as the spring buying season opens, turning up the heat on already- rising prices.

The number of homes listed for sale on real estate website Zillow was down almost 17% in late February vs. a year earlier. In some California markets, it was down more than 40%.

The supply crunch is likely to last all year, says IHS Global Insight economist Patrick Newport. “We’re still not building enough homes.”

The U. S. is creating about 1.1 million new households a year, but housing starts in January came in at an 890,000 annual rate, the government says.

As prices rise, though, more owners will be motivated to sell, easing supply shortages, economists say. The tight inventory is a big driver of rising prices.

Home prices were up 7.3% in the fourth quarter from a year before, Standard & Poor’s Case- Shiller data show. That was much faster than most economists expected for 2012.

Nationwide, the supply of homes for sale — based on the pace of sales — fell in January to 4.2 months, the National Association of Realtors says. That’s an almost eight- year low. A six- month to seven- month supply is considered balanced between buyers and sellers.

The availability of the most expensive homes in the markets Zillow tracks has tightened more than those at lower price levels.

Homes for sale in what Zillow defines as the top price tier in each market fell by almost 21% in February vs. a year earlier. The inventory of homes in the middle tier dropped 17%; those in the bottom tier fell 9%.

Five California cities in Zillow’s survey are among those seeing the biggest inventory drops, from a 48% decline in Sacramento to a 36% falloff in Riverside. Other cities are also seeing significantly fewer listings. New York is down almost 19%; Dallas/ Fort Worth, nearly 21%; and Orlando is off 27%.

Only five of 99 metros showed an increase in listings, led by El Paso, up 19%, and Albuquerque, up 8%. Little Rock, Fort Myers, Fla., and Youngstown, Ohio, also saw increases.

Written by,

Julie Schmit

USA TODAY

JOBLESS RATE DROPS TO 4-YEAR LOW

The American job market isn't just growing. It's accelerating.

Employers added 236,000 jobs in February and drove down the unemployment rate to 7.7 percent, its lowest level in more than four years. The gains signal that companies are confident enough in the economy to intensify hiring even in the face of tax increases and government spending cuts.

Last month capped a fourth-month hiring spree in which employers have added an average of 205,000 jobs a month. The hiring has been fueled by steady improvement in housing, auto sales, manufacturing and corporate profits, along with record-low borrowing rates.

Before the spree, employers added an average of 154,000 jobs from July through October and only 108,000 from April through June.

"The recovery is gathering momentum," Paul Ashworth, an economist at Capital Economics, said in a note to clients.

The gains could boost consumer spending, adding momentum to the U.S. recovery and helping troubled economies in Europe and Asia.

The U.S. economy is forecast to grow a modest 2 percent this year. Growth will likely be held back by uncertainty about the federal budget, higher Social Security taxes and across-the-board government spending cuts that kicked in March 1. And unemployment remains high nearly four years after the end of the Great Recession. Roughly 12 million people remain out of work.

The unemployment rate declined in February from 7.9 percent in January mostly because more people found work. Another factor was that 130,000 people without jobs stopped looking for work last month. The government doesn't count them as unemployed.

The last time unemployment was lower was December 2008, when it was 7.3 percent.

The unemployment rate is calculated from a survey of households. The number of jobs gained is derived from a separate survey of employers.

Hiring would be rising even faster if governments weren't shrinking their workforces, as they have been for nearly four years. Governments cut 10,000 jobs in February.

Some $44 billion in spending cuts kicked in last week after Congress failed to reach a budget deal. The cuts are expected to shave about a half-point from economic growth this year and lower total hiring by about 30,000 jobs a month from April through September, according to Moody's Analytics.

And most workers have had to absorb higher Social Security taxes this year. Someone earning $50,000 has about $1,000 less to spend in 2013. A household with two high-paid workers has up to $4,500 less.

Stock prices rose after the report was released and strengthened later in the day. The Dow Jones industrial average rose 67 points to 14,397, its fourth straight record close.

Robust auto sales and a steady housing recovery are spurring more hiring, which will trigger more consumer spending and could lead to stronger economic growth. The construction industry added 48,000 jobs in February; it's added 151,000 since September. Manufacturing gained 14,000 jobs last month and 39,000 since November.

Among industry categories, the biggest job growth in February was in professional and business services, which added 73,000. This category includes higher-paying jobs in accounting, engineering and information technology as well as temporary positions that typically pay less.

Retailers added 24,000 jobs. Education and health services gained 24,000. And the information industry, which includes publishing, telecommunications and film, added 20,000, mostly in the movie industry.

The economy is generating more higher-paying jobs. That trend is raising average pay, which will help offset the hit that Americans took from higher Social Security taxes and gas prices.

Hourly wages rose 4 cents to $23.82 last month. Wages have risen 2.1 percent over the past year, slightly ahead of inflation. Higher pay is vital to the economy because consumer spending drives 70 percent of economic activity.

Hotel chain Cambria Suites expects business travel to rise 5 percent this year and next. Cambria, a unit of Choice Hotels International, is building nearly 20 hotels around the country, doubling its total. It plans to add 110 jobs this year and 400 next year to its workforce of 600.

The improved job market can also benefit countries that sell goods and services to U.S. consumers and businesses.

"All you have to do is look at the trade numbers," says Bernard Baumohl, chief global economist at the Economic Outlook Group. "The strength in the U.S. economy is leading to faster growth in imports."

Imports rose 2 percent in January from December. Those from China surged 7 percent.

A stronger U.S. economy, Baumohl says, will also help a battered Europe, which is contending with high unemployment and a debt crisis. The United States is the No. 1 market for exports from the 27-country European Union.

"The extent to which the U.S. is recovering and potentially the labor market is improving is potentially an important dynamic that Europe would welcome," said Nick Matthews, an economist at Nomura in London.

The U.S. economy is benefiting from the Federal Reserve's drive to keep interest rates at record lows. Lower borrowing rates have made it easier for Americans to buy homes and cars and for companies to expand.

The Fed and key central banks overseas have taken extraordinary steps to pump money into their financial systems to try to spur borrowing and spending, boost stock prices and stimulate growth.

The Fed has said it plans to keep the benchmark rate it controls near zero at least until the unemployment rate has fallen to 6.5 percent, as long as the inflation outlook remains mild.

Friday's jobs report isn't expected to move up the Fed's timetable for any rate increase.

The brighter hiring picture has yet to cause a flood of out-of-work people who aren't looking for a job to start seeking one. The proportion of Americans either working or looking for work dipped one-tenth of a percentage point in February to 63.5 percent, matching a 30-year low.

Even though the recession officially ended in June 2009, many Americans have remained discouraged about their job prospects and have given up looking. Others have returned to, or stayed in, school. And the vast generation of baby boomers has begun to retire; the oldest are now 67. Their exodus reduces the percentage of adults working or looking for work.

The pickup in hiring hasn't yet benefited the long-term unemployed. Nearly 4.8 million Americans have been out of work for six months or longer, nearly 100,000 more than in January.

Further strong hiring gains will hinge, in part, on healthy consumer spending. So far, higher gas prices and a Jan. 1 increase in Social Security taxes haven't caused Americans to sharply cut back on spending. But if the economy can continue to add 200,000 or more jobs a month, it means that many more people will have disposable income to spend.

A big source of strength has been home sales and residential construction: New-home sales jumped 16 percent in January to the highest level since July 2008. And builders started work on the most homes last year since 2008.

The year-over-year increase in home prices in January was the biggest in six years. Higher prices tend to make homeowners feel wealthier and more likely to spend. So do record-high stock prices.

"If my house is worth a little more, my 401(k) is going up ... maybe I can afford to go buy that car, or continue to spend," says Ed Hyland, investment specialist at JPMorgan Private Bank.

By CHRISTOPHER S. RUGABER
AP Economics Writer

AP Business Writers Paul Wiseman in Washington and David McHugh in Frankfurt, Germany, contributed to this report.

SAN DIEGO HOME PRICES UP 9% REPORT: San Diego Homes Prices Up 9% From A Year Ago

San Diego home prices ended 2012 with a bang, mirroring a trend seen in other major U.S. metro areas.

The price of a local home sold in December rose 9 percent from the same time a year ago, based on the S&P/Case-Shiller home price report released Tuesday. That boost is the highest year-ago increase for any given month since July 2010. Values have risen 11 straight months, Case-Shiller data show.

All but one city, New York, showed year-over-year progress in December. New York prices fell 0.5 percent, according to the monthly index. When looking at the 20 cities in the index together, prices are up 6.8 percent.

“Home prices ended 2012 with solid gains,” David M. Blitzer, chairman of the index committee, said in a statement. “Housing and residential construction led the economy in the 2012 fourth quarter.”

Blitzer said prices on a national level bottomed out in March and continue to show increases. That, along with other housing news, suggests that “while housing is on the upswing some of the strongest numbers may have already been seen.”

Phoenix and San Francisco saw the biggest year-over-year jumps, at 23 percent and 14.4 percent respectively.

What’s behind the uptick?

In San Diego, rising sales and a smaller inventory of available homes are driving up price.

Inventory here is near a 52-month low, with about 4,200 active home listings in the county, according to numbers from the San Diego Association of Realtors.

One key reason listings are so low: A significant share of homeowners are underwater on their mortgages, meaning they owe more than the house is worth. That means many homeowners who might want to sell are sitting on the sidelines until they regain equity in their property.

The share of borrowers in San Diego County with negative equity has eased though, dropping from 31 percent in the third quarter to 28 percent in the fourth quarter, based on recent data from real estate website Zillow.

Steady price increases should help fuel the housing recovery. They encourage more people to buy before prices rise further. Higher prices also build homeowners’ wealth, which can spur more spending and economic growth.

In a separate report, the Commerce Department said Tuesday that new-home sales across the nation rose nearly 16 percent in January to a seasonally adjusted annual rate of 437,000. The percentage increase was the largest in nearly 20 years. And December’s sales were revised higher to 378,000 from 369,000.

Steady job creation and near-record-low mortgage rates are spurring more Americans to buy houses. Sales of previously occupied homes rose to the highest level in five years last year.

At the same time, the number of previously occupied homes for sale is at a 13-year low.

The supply of new homes for sale was unchanged last month at 150,000. That’s barely above August’s total of 143,000 — the smallest supply of new homes on records dating back to 1963.

At the current sales pace, it would take just 4.1 months to exhaust the number of new homes for sale, the lowest in eight years. Still, the increases in new-home sales are coming from depressed levels. Sales plummeted to a record low in 2011. And sales are still well below the 700,000 annual level that economists consider healthy.

The Case-Shiller index is calculated every month and has a two-month lag since it covers repeat sales.

Local real estate tracker DataQuick says the median price for a San Diego home sold in January was $350,000, nearly 15 percent higher than a year ago. The county is still about 32 percent below the peak of $517,500 set in November 2005.

Despite the increases, prices nationwide are still about 30 percent below the peak they reached at the height of the housing bubble in the summer of 2006. They are now at the same level as in the fall of 2003.

The Associated Press contributed to this report.

By Lily Leung

For Many, 2013 Will Be the Year to Finally Buy a Home

Bidding wars. Buyers paying cash. Homes selling for more than asking price.

Are we entering another housing bubble? No. But prospective buyers in many markets may be shocked at the competitive nature of the home-buying process these days.

The number of homes for sale fell to a 13-year low in January, leaving would-be buyers chasing a shrinking supply of homes just before the spring selling season.

"On a national scale, the market is clearly rebounding," says Greg McBride, senior financial analyst at Bankrate.com. "It's not that the prices are crazy, but the buyers outnumber the available homes for sale."

There was an average of 4.8 months of supply of existing homes for sale in the fourth quarter, according to the National Association of Realtors (that is, it would take 4.8 months to sell off the inventory at the current pace).

Six months' supply is closer to normal, says Celia Chen, a housing economist with Moody's Analytics, an economic research firm. In 2010, it went as high as 10 months. "Prices are starting to rise as a result of the strong demand relative to low supplies," says Ms. Chen.

That said, prices still are about 30% below their peak, she says. And the reasons for the slim pickings aren't good news. Lenders are taking their time putting bank-owned properties on the market, in part to keep prices up.

Plus, prospective sellers are waiting until prices rise before listing their homes for sale. About 11.9 million homeowners are still underwater—that is, they owe more on their mortgage than the home is worth—according to estimates from Moody's Analytics.

"When you're underwater, you're much less likely to list your home," Ms. Chen says.

And that means a potentially tough time for buyers. "You might have to look and shop around a lot," says Keith Gumbinger, vice president of HSH.com, a housing-market data provider. "Competition for the most attractive properties is going to be stronger than you think."

Real estate is local, of course. Inventories aren't as tight in Michigan and Ohio, for example, where many distressed homes are on the market, or in Oklahoma, where the market is more stable. But buyers may find their choices limited in parts of Arizona, Florida, Colorado, Texas, California and the Washington, D.C. area, among other places.

If you're in a tight market, consider these strategies to smooth the process:

1. Stay calm

Don't spend more than you can really afford.

"There's a renewed frenzy" in the market these days, says Christy Dean, a real-estate agent with Walt Danley Realty, focused on the luxury market in Paradise Valley, Ariz.

Buyers can get caught up in the hype, and that can mean spending too much, she says.

"I've seen it happen so many times. The wife is about to have their first or second baby. They have to have a house on this street," she says. "Don't get house poor. Be conservative."

2. Make your best offer

Remain calm, yes, but be realistic. When bidding on a home with multiple offers, you need your offer to stand out.

"Be bold," says Hal Lehrman, owner of Brooklyn Properties in New York. "Usually, the best buyer we have on a bidding war is the guy who lost the last bidding war. He's ready. He doesn't want that to happen again."

The danger is overpaying, but if it's the right house for you, that risk is tempered by other considerations. "In a rising market, you look back five years from now, you're not going to care about that extra $5,000," Mr. Lehrman says.

3. Check credit

Before setting foot in an open house or lender's office, check your credit reports atAnnualCreditReport.com (you can get one free report annually from each of three credit-reporting companies at this website). "If you see anything that doesn't appear correct or needs updating, a good time to make those changes is before you're in the process," says Mr. Gumbinger.

Consider buying your credit score as well. (One option is MyFico.com.) With your score in hand, you're in a position to negotiate, he says. You can say to the lender: "I'm looking for a 30-year-fixed [mortgage], I have a Fico [score] of 760, I can put 20% down. What sort of interest rates and closing costs can you offer me?"

4. Account for assets

In competitive markets, buyers need a lender's preapproval in hand before looking at homes.

"Preapproval is absolutely a must," says Vince Malta, a Realtor in San Francisco and a regional vice president for the National Association of Realtors.

Be prepared for a stringent underwriting process. Lenders want to see a consistent income stream. And a gift or funds transfer must be well documented, Mr. Malta says, in part to ensure you're receiving a true gift, rather than a phantom loan. "If it's not properly documented, it won't be counted toward your down payment," he says.

One benefit to a preapproval is that it sets a price limit on your home shopping, Mr. McBride says. "There's no sense falling in love with a place you can't afford to buy because you can't get approved for the loan."

5. Bring a big down payment

If possible, bringing more than 20% to the table will help your offer remain competitive.

"Anything that helps the down-payment side of it is a persuasive thing for a seller," Mr. Lehrman says. "It reduces the possibility that there will be a bank problem."

6. Be nice

If you're competing for a house with other buyers, stand out by making life a little easier for the seller. For example, be flexible about the closing date.

"If all things are equal—the seller is getting the same dollar amount from me or the next person—but I give the seller the flexibility of the settlement date that he prefers, maybe the seller is going to say, 'Money's not everything,' " says Dominic Cardone, a partner at Keller Williams Real Estate in Media, Pa., and a regional vice president with the National Association of Realtors.

7. Find a good agent

An experienced real-estate agent may alert you to homes before they come on the market. Plus, if your agent is respected, that can help you stand out with the seller's agent.

By Andrea Coombes

Third of O.C. buyers paid cash for homes in 2012

One in three buyers paid cash for Orange County homes last year, helping to drive an unexpected housing market resurgence.

Buyers bought a total of 10,760 homes in 2012 without a mortgage, a record high number in figures dating back to 1992, DataQuick Information Systems reported Wednesday.


That's 31.3 percent of the 34,380 homes sold last year. The average for the previous 20 years was 11 percent of all home sales.

Orange County's cash deals accounted for 7 percent of 145,797 all-cash deals made in the state, also a record.

DataQuick attributed the record number of cash purchases to high levels of investor interest and higher lending standards that make it much harder for many buyers to get a home loan.

Statewide, investors and vacation-home buyers accounted for about 55 percent of the all-cash transactions, DataQuick reported.

"It's clear that a lot of today's housing market recovery is being fueled by people putting their own money into homes," DataQuick President John Walsh said. "Some cash buying is part of a normal housing market, but we're at twice that normal rate."

Orange County averaged just over 4,100 cash buyers a year prior to 2012.

Walsh said that there's always a pool of empty-nesters, retirees, wealthy shoppers and overseas buyers who pay cash in any given year. But prior to the credit crunch that hit in 2007, no more than 10 percent of all Orange County homes sold without help from a bank or other lending institution.

In 2008, the proportion of cash buyers jumped to 16 percent in the county and rose steadily to 28 percent in 2011.

In addition, the ZIP code that includes Laguna Woods, a community of residents over 55, led the state in cash buying. DataQuick reported that 74 percent of the sales in Laguna Woods' 92637 were to cash buyers, the highest percentage among California ZIP codes with 100 or more deals.

Record numbers of buyers are paying cash despite 2012's record-low mortgage rates as buyers either were unable to get home loans or used cash to get an edge over other shoppers bidding on homes.

"The lending pendulum has swung to the opposite end of the spectrum," Walsh said. "Even a lot of well-qualified buyers can't get loans."

The statewide median price for a cash deal was $205,000, up 17.1 percent from 2011. California buyers using a mortgage paid a median price of $305,000 in 2012, up 10.5 percent from 2011.

In Southern California, nearly 78,000 buyers paid cash for a home last year, DataQuick figures show.

Just under 25,000 buyers paid cash in Los Angeles County, and nearly 29,000 paid cash in the Inland Empire. The Bay Area had just under 23,000 cash deals in 2012.

Written by,
Jonathan Lansner and Jeff Collins