All-cash realty deals tumble
Written by Carla Vianna on December 15, 2015
The percentage of cash transactions in the Miami residential realty market has trickled down over the past three years.
Within two years, the percentage of local cash deals dropped 10 percentage points, according to data provided by Ron Shuffield, president & CEO of EWM Realtors. Through November, 52% of closed deals were paid in cash. During that same period in 2014, cash deals represented 58% of all transactions, and in 2013 they represented 62%.
A haven for international buyers, the percentage of cash transactions seen in the Miami market is still more than double the national average, which was 24% in October.
About 52% of Miami’s closed sales were paid full in cash that same month – a 4% drop from October of last year, according to the Miami Associations of Realtors. The months prior show a similar decline.
Perhaps investors are becoming more cautious buyers. Or the strength of the US dollar has weighed down the purchasing power of international buyers, which last year represented 25% of all sales in Miami-Dade County through November – a 5% decrease from 2014, Mr. Shuffield said.
Also, he said, the decline confirms that mortgage financing has become more accessible to local buyers, who are now actively purchasing condos and single-family homes.
Miami Beach, which Ben Moss considers a more internationally driven market than Miami, is still seeing a significantly higher percentage of cash deals than its neighbor across the bay. About 71% of Miami Beach transactions under $1 million were paid in cash during the past six months, said Mr. Moss, a broker with ONE Sotheby’s International Realty. And a majority of single-family home sales above the $1 million threshold were also paid in cash in Miami Beach during the same period.
But, Mr. Moss warned, when it comes to the number of financed homes, there’s more than meets the eye.
Luxury buyers often choose to pay cash to receive the most favorable price tag.
“Sellers will always prefer cash,” Mr. Moss said. However, after putting down the cash, buyers will often wait six months and then go after a loan.
“I would bet that a great majority of people are paying cash but going ahead and refinancing after the purchase,” Mr. Moss continued. A majority of his clients are doing so, he said.
In the new condo market, buyers are doing something similar.
Although the 50% deposit structure requires cash up front, many buyers will finance the remainder of the deal, said Carlos Melo, principal of the Melo Group.
“Sometimes they have the money to pay cash, but at the end of the day they prefer to take a loan and buy something else,” he said.
Mr. Melo reported strong pre-sales at Aria on the Bay, a Melo Group residential project in the downtown Arts & Entertainment district expected to go vertical soon. With 65% of its units under contract, he said, the condo has attracted buyers from 33 countries.
Although fewer units were sold last month than the months prior, Mr. Melo didn’t seem too worried about the slight decline. When countries like Brazil and Venezuela face economic downturns, he said, investors venture out.