Orange County’s Housing Recovery Being Fueled by Cash - As the housing market heads forward on the road to recovery, Orange County is paving the way thanks to all of its cash transactions. In fact, the current number of cash purchases for houses in Orange County even exceeds the boom year of 2005! Specifically, one-third of the homes purchased in Orange County last year were bought with cash. This Southern California locale is seeing the highest number of cash payment for homes on record, and the number of cash transactions has tripled over the past two decades.
So, why is all of this cash floating around?
According to recent research, 55% of those purchasing homes with cash are either buying a vacation home or are investors who plan on renting out the home, flipping it, or using it as a vacation rental. Many of the other cash buyers include overseas buyers, empty nesters, and wealthy buyers who don’t want the hassle of getting a mortgage. Speaking of hassles, many experts believe that the stingy lending practices of mortgage companies as of late are playing a big role in the increase of cash buyers – not just in Orange County, but all over the nation. Even wealthier citizens are finding they can’t get approved for a loan because of the new approval policies of many lenders. And when it comes to getting a second mortgage, the process becomes even tougher. It has become very common for people both from the U.S. and from overseas to purchase a home in Orange County as a second home or a vacation house. Even though they have the money to buy a second home in a place as pricey as Orange County, they can’t get approved for a second mortgage.
But this cash trend isn’t all about mortgage problems.
Investors are using cash to get an edge up on “traditional” buyers. After all, cash allows for quick and easy transactions, so investors can quickly purchase a property from an owner who may not want to wait on a “traditional” buyer who has to jump through all of the hoops of getting a mortgage. Many of these investors then, in turn, will flip the property for a higher price to someone using financing to purchase the home. This has become even more common in the case of foreclosures, where investors can buy the property quickly – below market value – and then turn it over for a profit.
Purchasing a home with cash is not new, and it’s definitely not new in Orange County. Since so many people move here to enjoy the mild temperatures and the beaches, there has always been a higher-than-normal number of cash transactions in the area. However, this sharp increase may signal a strong future for the housing market!
This increase may also signal good things for the nation’s housing market as a whole. Those with cash may be leading the way to a higher increase in purchasing altogether, should the lending standards soften to allow for more mortgages.
Unfortunately, though, the cash trend could also deter people from buying the ol’ fashioned way, because they’ll have to compete with people who are paying cash. Either way, Orange County’s record-breaking cash trend has definitely sparked interest in the real estate world!
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