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Investors With Cash Beat First-Time Homebuyers to the Closing Table

cash-moneyFirst-time homebuyers in need of financing methods are losing out on homes that are being swiped from them by cash investors.

Investors' main focus during the housing bust were foreclosures and short sales, which they used for rental or flip properties. Today, now that the market has changed, investors are offering up cash deals on homes to beat out first-time buyers.

"Some economists and real-estate agents say the market is going through an uneasy transition," a report from Realtor.com said. "While the foreclosure starts rate is back down to where it was before the crisis, cash and investor buying in some cities remains far above historical levels. That creates difficulty for buyers of low-price homes because more buyers are competing for fewer properties."

The share of homes that were all-cash transactions in October 2015 fell by 2.6 percentage points over-the-year down to 33.9 percent, meaning that of all residential home sales during the month, slightly more than a third were paid for in cash, according to data released by CoreLogic. A steep decline in REO sales is the main driver behind the decline in cash sales. At their peak in January 2011, REO sales made up nearly a quarter (23.9 percent) of all residential home sales; by October 2015, REO sales made up less than a third of that total (7.3 percent).

While homeownership sits at a stagnant level, rental markets remain healthy, creating optimal opportunities for investors, according to a report from RentRange says are ripe for SFR investors.

The SFR market gained traction as a viable asset class with phenomenal growth in 2015. The homeownership rate fell to its lowest level in nearly five decades during the summer as more and more families and individuals chose to rent.

According to RentRange, markets in Florida, Louisiana, Arkansas, and Tennessee account for eight of the top ten increasing rental markets on the list. The report found that Western markets like California, Washington, and Hawaii occupy nine spots on the top twenty-five list.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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