I will take a look at local statistics regarding this subject in the Encinitas & Carlsbad area’s and post them.  With prices rising so rapidly in the last 18 months, Buyer’s have become more price conscious and picky regarding their purchases.  Overpriced homes are sitting.  Homes priced competitively are still seeing multiple offers.  -Paul

http://journal.firsttuesday.us/absentee-and-cash-homebuyers-in-decline/36465/

Absentee homebuyers purchased 26% of homes sold in Southern California during April 2013. This is down from the 31% share of homes purchased by absentee homebuyers one year earlier.

Likewise, homebuyers using all cash made up nearly 27% of home sales during April 2014, well below one year earlier, when 34% of all homebuyers used cash. Most of these cash buyers are absentee homebuyers, though some are end users who have emptied cash from other investments to purchase a home.

Both cash and absentee homebuyers have fallen as a percent of all home sales since peaking in the first quarter of 2013.  The absentee homebuyer share is decreasing more quickly than the share of all homebuyers using cash. This decrease is likely to continue through 2014, as home prices have reached an unsustainable peak. As soon as home prices begin to fall in low-tier markets, as they have in high-tier home sales, absentee homebuyers are expected to complete their exit.

Then, the percentage of owner-occupant homebuyers will rise by default. However, since end users don’t yet have the support of a jobs recovery to match 2007 employment numbers, today’s high home prices won’t stick in 2014.

April 2014     Mar 2014     April 2013

Absentee  Buyers                                  26.1%           27.7%          30.6%
Cash Buyers                                          26.7%           29.8%         34.4%

April 2014     Mar 2014     April 2013

Owner Occupant  Buyers                  73.9%           72.3%          69.4%
Cash Buyers                                         26.7%           29.8%         34.4%

Speculators chase home price movement

The percentage of speculators and cash homebuyers present in the housing market runs in tandem. Sellers often prefer cash offers to financed offers, as cash deals close more swiftly. Unlike owner-occupant homebuyers, speculators more often have access to the cash needed to fully fund their transactions. End users are normally relegated to traditional financing — 30-year fixed-rate mortgages (FRMs) and, if they chose to overreach, less friendly adjustable rate mortgages (ARMs).

Each year, the percentage of absentee and cash homebuyers makes a U-shape, finding its trough mid-year and rising to peak at the beginning of the following year. However, this was not the case in 2013. 2013 — purportedly the year of the speculator — actually saw the percentage of speculators decrease throughout the year. Further, the number of homes sales closing escrow each month slipped throughout 2013. Thus, both the number and percentage of speculators fell in 2013, bottoming in December 2013.

The reason for 2013’s speculator exodus? Home prices rose too quickly, pushed upward by speculator over-activity in 2012 and the first half of 2013. Prices continued to rise even as speculators diminished at the end of 2013. This is due to the sticky price phenomenon, in which sellers continue to list their homes at elevated prices despite waning fundamentals of sales volume with fewer homebuyers (apparently happy to overpay for property).

It typically takes around nine to twelve months for home prices to reverse direction to follow falling sales volume. Thus, home prices are expected to fall across all tiers — they are already down in high-tier home sales — by mid-2014.

Speculators drop the ball

As speculators complete their seasonal rise in the second half of 2014, don’t expect them to return to the levels seen in 2012 or 2013. In the next couple of years, end user owner-occupant homebuyers will make up more of the homebuying market.

This doesn’t mean end users are ready to take over the reins. They collectively lack the support of a full jobs recovery, which is expected by 2015. Still, lower incomes, along with rising mortgage rates, will cause downward pressure on home sales volume and prices through 2016.

Credit to:
http://journal.firsttuesday.us/absentee-and-cash-homebuyers-in-decline/36465/

Carrie B. Reyes

Carrie is lead writer on Market Charts and the Real Estate Economics and Economic Trends in California Real Estate books.