According to Jonathan Smoke, executive director of research for Hanley Wood's Housing Intelligence the paradigm for the traditional financing of a home purchase may be obsolete. In a post-housing bubble economy, Smoke observes the "model of securing financing is starting to shift."
At a time when a top-drawer FICO credit score and 30 percent down might still leave without you a bank loan, more and more home buyers and real estate investors are forgoing the mortgage altogether and turning to the payment everyone accepts: cash.
Smoke and his group have been compiling data which documents a huge increase in the number of cash transactions between the 12 months ending in June 2007, and the same time frame concluding in June 2011. While a number of these cash-flush buyers are overseas investors looking to maximize low prices and a weakened dollar, Smoke also points to the "the big story of the aging Baby Boomers" who are leveraging investment and retirement accounts to make second or vacation home acquisitions.
"A number of these transactions are coded as buyers who are not living in the homes as their primary residence," says Smoke.
Smoke is quick to point out the up and downsides to this emerging pattern: "This trend is both a reflection of opportunity, the chance to purchase a desirable property at a much lower cost, as well as necessity," in the lack of available credit that forces buyers to deplete cash reserves.
We may not know how sustainable the cash trend is, given there are only so many buyers with the means to purchase in this manner. And with a consistently high unemployment rate dogging the nation, coupled with alarming levels of consumer distress, this fad could go the way of the Edsel in short order.
But until we see how the pattern plays out, click through the following slideshow to uncover the Top 10 Markets to Buy a Home with Cash.
10. Ocala, FloridaHome to the Ocala National Forest, established in 1908, the second largest national forest in the Sunshine State, the city of less than 55,000 residents is a beacon of natural beauty - and a draw for investors looking to purchase a getaway property with cash. The Florida Trail, also known as the Florida National Scenic Trail, cuts through Ocala National Forest, and is pictured above.
What Midwest city comes is at #9 on the list?
9. Toledo, OhioThe Rust Belt has been hit hard by the foreclosure crisis, and while it may not appear to be the most evident tourist draw, the city of Toledo is situated on the western end of beautiful Lake Erie. Couple the scenery with the ability to purchase a variety homes for less than $25,000, and you'll begin to see why the city occupies this spot on the list for cash-rich investors.
Entry #8 returns to warmer climes...
8. Deltona-Daytona Beach-Ormand Beach, FloridaThis is the second of Florida's seven entries on the Top 10 list. Jonathan Smoke explains that "Florida cities are attractive coastal markets in general. So as a result, they are a favorite location for investor types." At the same time, "higher cash numbers are reflective of the fact that you can't locate traditional financing as easily in these markets because they have been impacted by the foreclosure crisis and there's more inventory available."
Daytona Beach is a haven for motorsports, with the old Daytona Beach Road Course having hosted races for over 50 years. This course was replaced in 1959 by the Daytona International Speedway. The city is also the headquarters for NASCAR and the Grand American Road Racing Association. Got cash and looking for a taste of life on the edge? Daytona Beach is your place.
What state includes entry #7 on the list?
7. Port St. Lucie, FloridaThe Florida city grew rapidly between 2000 and 2010, picking up an additional 75,000 residents according to the Census Bureau. However the new residents were dealt a heavily blow when unemployment soared above the national average to 10.5 percent in February 2009. And in 2008, nearly 11,000 homes went into foreclosure. Hard times for the home of the New York Mets spring training facilities are a boon to real estate investors with cash to spare.
Looking for a different Florida town to buy a home with cash? Let's check out #6.
6. Bradenton-Sarasota-Venice, FloridaLocated on the southwestern coast of the Sunshine State, the area is famous for its inviting sandy beaches and fabulous weather. Charles Ringling, the famous circus pioneer invested in land, developed property, and founded a bank in the 1920s. From his bank, he loaned money to fledgling businesses, fairly ironic beginnings to reflect upon in this time of credit scarcity.
What #5 entry was named for an exotic European vacation spot?
5. Naples-Marco Island, FloridaNaples has few competitors for quiet beauty. The city was founded during the late 1880s by former Confederate general and Kentucky U.S. Senator John Stuart Williams and his partner, Louisville businessman Walter N. Haldeman, the publisher of the Louisville Courier-Journal. The area's mild climate and abundant fish and game have been well chronicled, and many have likened the locale to the sunny Italian peninsula for which it is named. Once the housing market rebounds, bargains here may not last long.
From silent majesty to party central. Let's take a look at #4.
4. Miami-Fort Lauderdale-Pompano Beach, FloridaIt doesn't take a genius to figure out that those looking for vacation or retirement properties might be attracted to the Miami area's sandy beaches, beautiful bodies and epic nightlife. But to explain the locale's high placement on the list of Top 10 Markets to Buy a Home With Cash, just Google the term "Miami Foreclosures" and see what pops up. The area has been positively battered by the foreclosure crisis. Foreclosure.com lists over 19,000 current properties that can be had for prices that would have been unthinkable not five years ago.
Ready to get out of Florida? Let's look at #3.
3. Detroit-Warren-Livonia, MichiganThe Motor City has been another sore spot in the foreclosure crisis. Several months ago, I wrote about a home that could be purchased for $7. Yeah - it's been that bad in Detroit. Empty homes abound but a 2009 parcel survey found that 93 percent of the inventory is in good condition, which makes it easy to attract buyers with cash. In 2011, Mayor Bing announced a comeback plan for the municipality to better focus services to meet the needs in the more and less densely-populated areas. With a focus on reinvention, now is the best time to invest in one of America's most famous cities.
It's back to the coast for #2.
2. Myrtle Beach-Conway-North Myrtle Beach, South CarolinaJonathan Smoke explained this enclave's high ranking on the list of Top 10 Markets to Buy a Home With Cash as follows, "Myrtle Beach is a very attractive second home place, the warmest large market furthest north on the East coast, a beacon for active adults."
Founded as a getaway for lumber workers from Conway, Myrtle Beach rapidly developed into a major tourist destination in the Southeastern United States in the late 20th century and 2000s. With lower home prices available, a combination of bargain-hunting in a desirable location makes the area a hot spot for cash-ready investors.
Can you guess which state boasts the #1 city for cash real estate purchases?
1. Cape Coral-Fort Myers, Florida65 percent of home purchases made between June 2010 and June 2011 in this area were completed with cold hard cash. That's simply staggering, and represents a 32 percent jump over the same period in 2007. However, with prices down 36 percent in Cape Coral overall, it may be a lot easier to come up with the funds.
Founded in 1957 and developed as a master-planned, pre-platted community, in its early years, Cape Coral was primarily known as a retirement mecca. This changed with a population and construction boom in the 1990s, which brought in younger families and professionals.
If you have the cash handy, are you interested in buying a property in any of these Top 10 markets?
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.comand The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.