Professional Cash Buyers Are Buying - Are You?
June 2, 2009
As we continue our series of blog posts about the change in real estate markets, we will now show a little known “secret”. What the average Joe is doing, and what the professionals are doing, are 180 degrees apart. Again, we will use Tampa as our example but what we show is happening in many places across the USA.
So What Is Joe Doing?
Referring to the typical home buyer as the “average Joe”, let’s see what is happening. What everybody “knows” in the market is that times are tough and RETAIL prices are dropping. Referring to the figure below, we see that this is true in every submarket in Tampa.
Chart Shows 12 Months Of Data For Various Tampa Submarkets
NOTE: This is RETAIL pricing. Prices paid by investors is RISING.
So, with this happening, Joe still believes now is not a good time to buy. Let’s also look at the number of mortgages being written but let’s go all the way back to 2005 as we started coming off the boom in Tampa. Here is what those charts look like for conventional, FHA, and VA financing.
Clearly, Joe is still on the sidelines.
What Is Sue The Professional Doing?
As mentioned in a previous blog post, there is now BIDDING WARS between professionals when a house goes on the market priced right. Let’s see if we can really QUANTIFY that. One very good measure of professional activity is CASH purchases. Typically pro’s move in with very low (or zero) financing so if we look at the number of cash purchases, it give us some indication as to the direction of pro’s and knowledgeable individuals. We can also verify by being in the market that this is EXACTLY what is really happening.
Referring to the figure below, we see that Sue was not buying in 2005 when Joe was buying everything in sight. We also see that now Sue, the Cash Buyer, is now buying while Joe is bailing. The typical example of the pro’s doing EXACTLY OPPOSITE what most people do.
Just for comparison purposes, let’s now put conventional financing and cash on the same chart.
NOTICE THAT THERE IS NOW MORE CASH BUYS THAN FINANCED!!! If that does not tell you something interesting about the way the pro’s think vs Joe.
The Cash Buying Pro Is Now A Huge Percentage
A natural question to then ask is what percentage of sales is cash now, and in the past. This is shown in the chart below:
From this chart, we can see that cash buyers are now nearly 40% of the Tampa Bay market. If you ever wanted an inside look at what the “pros” are doing in a market, this shows you.
Predictions For The Future
While we don’t have a crystal ball either, let’s see what predictions that we might be able to draw from this information.
- Cash buyers & pro’s are buying everything in sight right now;
- Conventional buyers still see “gloom & doom”;
- Inventory will be absorbed by the professionals given rents versus prices;
- At some point (we predict 6-12 months), Joe will wake up and then realize they are about to miss a golden buying opportunity;
- Once a significant number of Joe’s start to “get it”, then prices begin to rise again as they scramble to buy homes before prices “rise too much”.
The joys of a real estate cycle……. it is just too predictable.
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Real Estate Investor Sentiment: The Bear & Bull Battle
April 1, 2009
A couple of weeks ago, we hosted an educational event for the REO & foreclosure world with several hundred people from around the country on the line.
We thought it would be interesting to see what the investor sentiment was 
given all the gloom & doom on the news. We asked people how they were feeling about the real estate investment market.
Their choices where:
- I am bullish in this market and want to buy properties;
- I am bearish in this market;
- I am undecided
About 30 seconds after launching the poll, I was ready to fall out of my chair. Well over 70% of the people responding were BULLISH. Another 20%+ were undecided, and just a few percent where bearish.
Wow! I was completely surprised with that result. Given the news that exists out there today, I would have predicted a 3 way split….. Oh well, so what do I know.
As we launch NoBullRE.com, we thought it would be fun to do a similar poll here amongst the readers and let you see the results. I know people are reluctant to do anything on the web but this is TRULY ANNONOMOUS and is really for everybody’s benefit.
Ok, I know it’s April Fool’s day but if you will, please vote how you actually feel so that everybody can use these results.
Loading ...Vote To See Current Poll Results
Also, we would love to hear from you below and expound upon your thoughts and reasons.
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Who Is "REALLY" Making $ In Today's Real Estate Market?
Our 29,689 Members Tend To Agree...
It's Usually Not The GURUs
Have you ever noticed that every "Guru" real estate pitch sounds the same........
They once were poor, but now are rich working only 5 hours per week, and you can be rich too if you just buy their "can't fail system".
Or have you noticed that every property promote has a can't miss proposition, if you just buy TONIGHT.
At the NoBullRE club, we are huge believers in real estate investing...... but we also know that every approach has two sides: Nothing is perfect.
If you want unbiased ("No Bull") facts of who is making money, how are they doing it, and where do they get their knowledge, then you don't want to miss joining the NoBullRE Club
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