Friday, February 19, 2010
Manhattan Beach Home Sales... Is Cash King?
Recently there has been a lot of speculation at our local consumer blog, MBC about where the Manhattan Beach and the Beach Cities real estate market is headed. While we have seen prices decline in the last year we still don't have a large number of foreclosure or short sale properties in either Manhattan Beach or the Beach Cities. As we haven't experienced that perfect storm of massive numbers of foreclosures along with high numbers of short sales, property values are still higher then many expected.
From September 2009 to today ( February 19, 2010) there have been 119 single family homes close escrow. Of the 119 closed home sales 24 (20%) were all cash. 4 sales had less then 20% down, 26 sales had 20% down and the other 65 sales saw down payments in excess of 20%. What was interesting is that not all the cash sales were upscale homes. Cash sales were across the spectrum on price. By the same token a number of Luxury homes buyers leveraged their purchases with loans above the $1,000,000 maxi mun mortgage interest deduction figure. There were 15 home sales over $3,000,000. Of those 15 homes 4 sold all cash, 5 had down payments of 40% or more and the other 6 buyers put down between 20%-30%. A few of these folks may have been reaching on price but I'm guessing a number of these buyers were taking advantage of very low interest rates and are keeping their cash for future investments.
Another interesting factor was the number of buyers who got a first loan of $729,750 and a second loan to make the total loan amount about $1,000,000 to take advantage of the mortgage deduction limit. A year ago lenders were not making second loans no matter how much money a buyer had as a down payment. There were also a few folks who obtained new secondary financing a few months after the close of escrow.
I don't know about the percentage of down payments in other zip codes but I would think that a market where the median price is well over $1,000,000 and 20% of all sales are cash sales is a market where most owners and buyers are financially savvy. The bad news is that I expect to see more foreclosures and short sales in the coming months as the California economy continues to be in trouble and mortgage rates get ready to move higher. The good news is that our local real estate market looks as if it will continue to weather the storm better then expected.
To view an update about this topic as of October of 2014 please read All Cash Makes the difference...