Record Number of California Homes Bought with Cash

February 6, 2013

The number of California homes purchased with cash reached an all-time high last year, the result of high investor interest, a difficult mortgage environment, and perceived higher returns on investment, a real estate information service reported.

A total of 145,797 condos and houses were bought without mortgage financing in 2012, a record. That was up from 125,812 in 2011, the previous high. In 2007, as the housing market deflated, cash sales totaled 39,731, according to San Diego-based DataQuick.

"It's clear that a lot of today's housing market recovery is being fueled by people putting their own money into homes. Some cash buying is part of a normal housing market, but we're at twice that normal rate. There are always some rich people, also buyers from abroad, but in a normal market the biggest single category would be retirees and empty-nesters who are down-sizing. Today, a lot of buyers are chasing what they view as the deal of a lifetime," said John Walsh, DataQuick president.

Cash purchases accounted for a record 32.4 percent of California's overall home sales last year, up from 30.4 percent in 2011 and more than double the annual average of 15.6 percent since 1991, when DataQuick's cash statistics begin.

"I'm sure a lot of today's cash buyers would love to take advantage of the current low mortgage interest rates, but since the 'loans-gone-wild' days of 2004-2006, the lending pendulum has swung to the opposite end of the spectrum. Even a lot of well-qualified buyers can't get loans. While the market overall is improving, sales levels are still below average, and prices much closer to the bottom than to the peak," he said.

Last year a total of 447,573 homes were sold in California to all buyers, whether they used a loan or cash. While up from the cyclical low of 383,748 sales in 2007, last year's total was well below the peak of 775,831 sales in 2004, and it was about 13 percent below the state's average annual home sales since 1988.

The median price paid for a California home, whether financed or bought with cash, was $275,000 in 2012, up 10.0 percent from $250,000 in 2011. The annual median peaked at $469,500 in 2006, and bottomed out at $245,000 in 2009. Around half of the median's peak-to-trough drop can be attributed to shifts in market mix.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

Cash buyers paid a median $205,000 last year, up 17.1 percent from $175,000 in 2011. Buyers who financed with a mortgage paid a median $305,000 in 2012, up 10.5 percent from $276,000 a year earlier, DataQuick reported.

Last year more all-cash deals occurred above the $500,000 threshold, and fewer below $100,000. Cash-only purchases of $500,000 or more rose 35.0 percent compared with 2011. That compares with an 11.2 percent decline in the number of homes cash buyers purchased below $100,000.

Some buyers in the mid- to high-priced markets used cash either because they couldn't qualify for a loan or wanted to better their chances of prevailing in bidding situations. It's likely that in the sub-$100,000 market cash-paying investors simply couldn't find enough homes for sale in that price range. Inventory in affordable neighborhoods has generally been low because foreclosures have slowed, meaning less supply, and many people in these areas still owe more than their homes are worth, hence they can't sell.

Investors and vacation-home buyers bought roughly 55 percent of all homes purchased with cash last year. Multi-home buyers, meaning those purchasing two or more properties, accounted for about 28 percent of last year's cash sales, up from around 24 percent in 2011, according to an analysis of buyer names in the public record.

Last year more than 11,700 cash-paying, multi-home buyers collectively purchased about 41,450 homes. Compared with 2011, that marked a nearly 19 percent increase in the number of multi-home buyers and a roughly 36 percent jump in the number of homes they bought. In 2012, individual investors or partnerships paying cash bought as many as 1,300 homes, although the vast majority (88 percent) of these multi-home cash buyers bought fewer than five, and 65 percent bought two.

While cash purchases are up in all areas, there are regional differences. For example, in San Mateo County 24.2 percent of the purchases were cash, while in Merced County it was 42.9 percent.

Among the California zip codes with at least 100 sales last year, the two with the highest cash purchase rate were in Orange County's Laguna Woods 92637, with 74.0 percent of the homes sold going to cash buyers, and Riverside County's Indian Wells 92210, with 71.6 percent.

 

Cash: Number of homes bought with no mortgage financing

Community  2011  2012   % Chng
       
Los Angeles               19,580       24,688      26.1%
Orange                     8,346       10,760      28.9%
San Diego                  9,857       13,052      32.4%
Riverside                 14,220       15,559       9.4%
San Bernardino            10,418       10,954       5.1%
Ventura                    1,933        2,457      27.1%
Imperial                     538          501      -6.9%
Southern California       64,892       77,971      20.2%
       
San Francisco              1,372        1,816      32.4%
Alameda                    4,241        4,986      17.6%
Contra Costa               5,246        5,766       9.9%
Santa Clara                4,625        5,415      17.1%
San Mateo                  1,694        1,948      15.0%
Marin                        758        1,168      54.1%
Solano                     2,291        2,535      10.7%
Sonoma                    1,711        2,122      24.0%
Napa                         354          490      38.4%
Bay Area                  22,292       26,246      17.7%
       
Santa Cruz                   553          739      33.6%
Santa Barbara                950        1,257      32.3%
San Luis Obispo              898          998      11.1%
Monterey                   1,124        1,241      10.4%
Coast                      3,525        4,235      20.1%
       
Sacramento                 7,894        9,101      15.3%
San Joaquin                3,541        3,551       0.3%
Placer                     2,024        2,386      17.9%
Kern                       3,875        3,924       1.3%
Fresno                     3,326        3,307      -0.6%
Madera                       798          723      -9.4%
Merced                     1,459       1,217     -16.6%
Tulare                     1,680        1,719       2.3%
Yolo                         505          610      20.8%
El Dorado                    934          991       6.1%
Stanislaus                 2,680        2,553      -4.7%
Kings                        415          433       4.3%
San Benito                   139          173      24.5%
Yuba                         311          364      17.0%
Colusa                        61          107      75.4%
Sutter                       362          490      35.4%
Central Valley            30,004       31,649       5.5%
       
Mountains*                 1,869        2,176      16.4%
       
North Calif*               3,230        3,520       9.0%
       
Statewide*               125,812      145,797      15.9%

 includes additional counties

 

Source: DataQuick; DQNews.com

Media calls: Andrew LePage (916) 456-7157

Copyright 2013 DataQuick Information Systems. All rights reserved.

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