Saturday, March 12, 2011

Cash Buyers & Hawaii Real Estate

In 2010, approximately 12% of Hawaii buyers paid cash for single-family homes, about 33% for condo sales; and 70% for vacant land.   This compares to 28% for cash home sales nationwide.  The housing markets hit hardest by the economic downturn had the highest percentages of cash transactions.

What does this mean for our Hawaii real estate market?  The cash sales could indicate several trends.  1) that investors are more active in the market; 2) that loans are harder to get, without large downpayments and excellent credit; 3) loans for land and condotels (a large portion of Waikiki sales, for instance) are historically hard to find.

If you have cash, should you use it for a real estate purchase?  With the dismal rate of interest banks and CDs & money market instruments are paying now, the bet on real estate appreciation seems a good one.  We all know that it is a buyer's market; sellers are motivated; rates are predicted to rise.  And in the Oahu real estate market, many areas seem to have turned the corner to increased prices and decreased inventory and days on market - Hawaii Kai for one.

Paying cash gives you a good negotiating position, especially for a bank-owned or short sale property.  The attraction of a quick close and no buyer qualification can be very strong for the lender.  If you are considering a higher-priced property, negotiating for a 10% cash premium can be a big savings in the purchase price.

Seven of the 10 most-expensive single-family home sales in 2010 were bought for cash, including the highest, a $22-million Kahala home.   So if you have the means, consider getting in our Oahu and Hawaii Kai real estate market now, to take advantage of the edge you will have as a cash buyer.

Barbara Abe, Realtor