Those of us in Arizona can still recall those days when real estate prices were booming back in 2005/2006, and it seemed like prices would never go down. The out of control and unsustainable rise in home values and subsequent bust, was a factor of many things…to include poor lending practices by banks, over speculation from investors, prices outpacing the increases in general population’s salaries/earnings, and buyers overleveraging themselves with too much debt.
Investors were buying multiple properties with little to no money, down financing themselves into debt oblivion. They were more concerned with making quick and easy money rather than a long term investment, and expected the double digit percentage appreciation to continue, without having to add any improvement or value to the home.
Today in 2011 we have just as many investors, if not more, than 2005/2006. However, the buyers of today are much different than the buyers of the past. Tom Ruff from The Cromford Report put together some interesting data looking at where the buyers are coming from and how they are paying for real estate. Historically in Phoenix, even during the recent boom, 10% or less of all sales were cash buyers. The rest were some form of mortgage financing. Now look at these numbers from May:
- There were 8,751 home sales
- 2,718 home buyers or 31% were from out of state
- 60% of out-of-state buyers purchased with cash
- 32% of in-state buyers purchased with cash
- 41% of all homes purchased in Maricopa County were cash purchases
- 69% of out-of-state buyers plan to live in the homes they purchased
- 79% of in-state buyers say they will occupy the home they purchased
- In April 2005, Californians bought 2,153 home; Canadians, 38
- In April 2011, Californians bought 453 homes; Canadians, 540
- The top-ten list by state and the number of buyers: CA, 453; WA, 194; CO, 124; MN, 95; NY, 86; OR, 72; TX, 66; IA, 61; WI, 59
- 2 buyers from WV—more wanted to come, but vehicles broke down crossing Ohio
- Maricopa had a least one buyer from all 50 states with the exception of MS and VT
- The median price for investors was $71,250…. 24% of all sales… 69% paying cash