We heard that last year, across the country, about a third of all sales were closed with cash, or at least did not have mortgage contingencies (that means that the buyers could have gotten a mortgage, either before or after the closing, but didn't require that they have one in order to close). Given the low interest rates available out there now, that's particularly amazing, and says a lot about the difficulty of getting a mortgage now. Even at the best of banks and mortgage companies, there are more regulations, requiring more paperwork, effort, and time, than ever before. Many people who can, therefore, are choosing to opt out of the process.
When it comes to Connecticut, the results are even more surprising. Last year, 39% of state sales were reported as cash deals. We were about the same, or even a little higher, at Pearce. Then we looked at this year's statistics, which were greatly affected by weather and delays, so that sales were down across the region for that period. We were startled to discover that 56% of all our sales for the first four months were for cash, or without mortgage contingencies! And this in a period when not only are interest rates historically low, but when the stock market is performing very well, leading investors to want to keep their money in the market. We know credit is tight, appraisals are an issue, and that exceptions are rare, but we still can't get over this fundamental change in the way business is done in our industry. Will it continue? Dodd-Frank would argue yes, but the number of buyers out there who can't afford to pay cash would argue no. I guess we'll just have to wait and see.