Are the cash buyers gone?

“The day of the cash buyer is over” says Mike Krone. He is an attorney affiliated with one of the biggest closing firms in Massachusetts, Kriss Law/Atlantic. He should know.

What does this mean for the real estate market?
Homeowners in the area where I work are gloating right now. The market has jumped up appreciably. Most of the towns I serve have risen to match or exceed peak prices from before the last recession. There are few underwater buyers left.
The cause of the price rise was too much demand on too little supply. This caused bidding wars, competition, and buyers believing that they had to pay more in order to buy a house. Add to that, cash buyers beating out buyers with mortgages; this caused some buyers to give up their rights to buy a house.
Supply-demand-economicsAt least part of the supply and demand mismatch that caused prices to rise was in the influx of these investment cash buyers. These buyers increased demand and added to the hysteria of last spring’s market.
I expected that once the market gets too inflated to be a good investment, the investors would start to put their cash elsewhere. According to Attorney Krone, it’s happening. I am cautiously optimistic. Without an influx of cash buyers from outside the local economy, demand will decrease and our market will stabilize.
As a buyer’s agent, this makes me happy.

Attorney Krone got to say, a couple of times, that history repeats itself. Yes it does. Then he spent the better part of two hours telling a room full of real estate agents about the current roadblocks to borrowing that are part and parcel of the current highly-regulated mortgage market.