Inquiring minds are looking at a report on My Budget 360 showing that 47 percent of December’s Phoenix Home sales were ALL CASH.
These desert cities rose up during the housing bubble with plentiful and cheap land to expand on. Builders were able to build at a feverish pitch with the sound of jack hammers cranking and skeletal frames of model homes for as far as the eye could see since demand for easy loans and second homes were pushing many of these markets upward. Las Vegas and Phoenix had enormous demand from eager wide-eyed California investors. It is hard to pinpoint exact figures but at one point over 40 percent of purchases in Las Vegas were estimated to come from California buyers. Home sales for these regions have perked up but anything looks higher when you are bouncing off the financial ground. Yet I believe something else is going on here. Many sidelined investors are now jumping into the market head first since they are merely reacting to lower prices. Yet many are not thinking about longer term fundamentals like rising oil costs that will likely stifle many of these desert communities. All that is being seen right now is insanely low prices that haven’t been on the radar for over a decade.
Last month, almost half of all home sales were the result of non-residents:
“Could it be that all these people are buying simply to move into a place and live with no mortgage? That is unlikely. 42 percent of all the purchases came from absentee buyers or people outside of the area.”
Home prices in Phoenix are now down 54 percent from their peak in 2006, and are, in fact, back to you would have to go back to 2000 prices.
The graph below shows very clearly that 47 percent of home buyers in December were all-cash buyers:
The author’s data is very good. Unfortunately, he is missing the reason for the All-Cash buying. It is a combination of lack of available financing for purchasing homes and the investor’s fear of impending inflation. This is creating a squeeze for investors. They don’t want to be left out (inflation) but can’t get financing for more than a couple of homes (All-Cash).
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