Lots of Cash

Many more real estate sales lately are for cash.  While it's true everywhere in the country, it's particularly true in Connecticut.  Can you guess the percentage of people who close with cash?  If you guessed 39%,  you're right!

While that seems like a lot, and it is, it makes some sense when it's so cumbersome to fill out the paperwork for a mortgage, and when the restrictions are so much tighter.  I suspect that some number of those buyers later apply for, and receive, mortgages, especially with rates so low (although they're certainly not losing much in the way of interest on cash, and they don't have a great deal of stability in the stock market).

When there is no mortgage, the closings often happen much sooner.  We see people closing in a couple of weeks, once all the inspections are finished.  Getting a mortgage later really speeds the process up.

One tricky question, however, is how to know whether the buyer is serious and qualified, without the help of the mortgage qualification letter.   It seems strange, but it's sometimes easier to believe that someone is really going to buy if they are borrowing the money, than when they say that they have it in the bank.  Not a bad issue to have, I guess, but it has been arising more frequently.  The danger of real damage is less, however, when the closing is quick. Nothing's perfect, but cash is king!

Rates Are Creeping Up

Here's a shout out to all those buyers out there who are waiting to be sure that real estate prices have hit bottom:  You may succeed in buying when prices have passed the bottom, but you may lose on rates.  Although the Fed has signaled that it won't be raising its rates any time soon, the mortgage rates are more creatures of supply and demand, as well as bank appetites for new loans.  Rates also tend to follow a seasonal pattern--lowest at election time (what a surprise!), and higher in the busiest spring buying season).

 I get rates sent to me on a weekly basis, and it's clear that they are headed up.  If you have waited this long to buy, don't make the mistake of continuing to wait.  They may go back down in the fall, but, by then, prices will have risen.  Buyers have increasingly begun to think of the cost of housing as the cost of the monthly payment, since that matters far more to them than the actual price of the home at any given time.  Not only are mortgage rates heading higher, but insurance and taxes have risen in most places as well.  Buy now, or regret it later!

First-time Buyers

There are lots of first-time buyers in the market now, and they are driving the action.  It's clear that it's harder to get a mortgage now than it was when those of us who are older bought our first homes, and the qualification standards are stiffer, even though rates are lower.

Because they are buying for the first time, they are often more hesitant to buy in situations where they might not feel comfortable.  Therefore, they often request more in the way of repairs, tests, and allowances for improvements.  In addition, having buyers ask for contributions to closing costs is a trend that we have seen in increasing numbers.  Sellers should not be insulted, since first-time buyers have no history, so no way of knowing that such a proposition might seem aggressive.

Since beginning buyers often look at more options, open houses have been very popular.  There may also be more repeat showings, with relatives and friends coming to weigh in on the potential purchase.  The closing can take longer as well, since documentation requests may be unfamiliar and take more time to fulfill.

Whatever the downsides, there is a great upside:  They are very motivated to buy and own their own homes, and they are out there!