IRVINE, CA—The uptick in interest rates, albeit small, at the beginning of this year is swinging the pendulum back more in favor of all-cash home buyers, but there's more, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. According to a recent report from the firm, cash-sales share increased annually for first time since Q1 2013. We spoke with Blomquist about what might be driving the increase and what it says about the home-sales market and the state of the home-mortgage industry.
GlobeSt.com: What is driving the increase in cash-sale share of homes sold that your firm's report revealed?
Blomquist: The uptick in interest rates, albeit small, at the beginning of this year is swinging the pendulum back more in favor of cash buyers. That interest rate rise means there will be slightly fewer buyers relying on financing who can afford any given home for sale. So, the demand balance has shifted a bit away from financed buyers and toward cash buyers thanks to that interest-rate rise.
On the supply side of the equation, NAR numbers indicate a shrinking inventory of homes for sale, and so it's more likely on any given home that a cash buyer will be competing, and often cash offers will beat out financed offers. Less easy to quantify is a Trump Bump in confidence among real estate investors, similar to the stock-market bump. Many real estate investors I talk to are more confident to deploy capital than they were before the election. That may be partly due to President Trump's real estate background and overall political approach, and it may be simply because the election brought some level of certainty back to the marketplace.
GlobeSt.com: What does it mean for the home-sales market now and into the future if the cash-sales percentage continues to rise?
Blomquist: This elevated cash sale trend indicates that the Great Recession is continuing to have ripple effects on the housing market and how Americans view homeownership. The housing boom the country has been experiencing the last few years may look on the surface similar to the last housing boom, but beneath the surface it is completely different.
The last housing boom was grounded in a belief that homeownership is a lofty goal for most Americans, a belief that was widely held by policy makers, home builders lenders and prospective homebuyers. The current housing boom is grounded in a risk-averse environment where homeownership is often considered an unnecessary risk, and this risk-averse posture is widely held by policymakers, homebuilders, big-bank lenders and prospective homeowners.
GlobeSt.com: What does the rise in cash-sale percentage say about the state of the home-mortgage industry?
Blomquist: The mainstream home-mortgage industry has become extremely risk-averse and is steadily losing market share to a new crop of non-traditional lenders who are willing to take on more risk and are also more innovative when it comes to lending. Some of these new non-traditional lenders are incubating innovation in the world of lending to real estate investors, but I believe we'll see more of that innovation developed in the real estate investing world migrate over to the owner-occupant world in the coming years, shifting the landscape of the home mortgage industry even more.
IRVINE, CA—The uptick in interest rates, albeit small, at the beginning of this year is swinging the pendulum back more in favor of all-cash home buyers, but there's more, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. According to a recent report from the firm, cash-sales share increased annually for first time since Q1 2013. We spoke with Blomquist about what might be driving the increase and what it says about the home-sales market and the state of the home-mortgage industry.
GlobeSt.com: What is driving the increase in cash-sale share of homes sold that your firm's report revealed?
Blomquist: The uptick in interest rates, albeit small, at the beginning of this year is swinging the pendulum back more in favor of cash buyers. That interest rate rise means there will be slightly fewer buyers relying on financing who can afford any given home for sale. So, the demand balance has shifted a bit away from financed buyers and toward cash buyers thanks to that interest-rate rise.
On the supply side of the equation, NAR numbers indicate a shrinking inventory of homes for sale, and so it's more likely on any given home that a cash buyer will be competing, and often cash offers will beat out financed offers. Less easy to quantify is a Trump Bump in confidence among real estate investors, similar to the stock-market bump. Many real estate investors I talk to are more confident to deploy capital than they were before the election. That may be partly due to President Trump's real estate background and overall political approach, and it may be simply because the election brought some level of certainty back to the marketplace.
GlobeSt.com: What does it mean for the home-sales market now and into the future if the cash-sales percentage continues to rise?
Blomquist: This elevated cash sale trend indicates that the Great Recession is continuing to have ripple effects on the housing market and how Americans view homeownership. The housing boom the country has been experiencing the last few years may look on the surface similar to the last housing boom, but beneath the surface it is completely different.
The last housing boom was grounded in a belief that homeownership is a lofty goal for most Americans, a belief that was widely held by policy makers, home builders lenders and prospective homebuyers. The current housing boom is grounded in a risk-averse environment where homeownership is often considered an unnecessary risk, and this risk-averse posture is widely held by policymakers, homebuilders, big-bank lenders and prospective homeowners.
GlobeSt.com: What does the rise in cash-sale percentage say about the state of the home-mortgage industry?
Blomquist: The mainstream home-mortgage industry has become extremely risk-averse and is steadily losing market share to a new crop of non-traditional lenders who are willing to take on more risk and are also more innovative when it comes to lending. Some of these new non-traditional lenders are incubating innovation in the world of lending to real estate investors, but I believe we'll see more of that innovation developed in the real estate investing world migrate over to the owner-occupant world in the coming years, shifting the landscape of the home mortgage industry even more.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.