By Jessica Foster
RISMEDIA, August 7, 2008-(MCT)-Home buyers on the Grand Strand are plopping down big bucks to purchase real estate these days.The area has seen an uptick in the percentage of buyers paying for real estate up front in cash rather than the usual method of taking out a mortgage. Between January and June, 22 percent of buyers paid cash compared with 16 percent in the same period last year.
That’s the highest percentage this area has seen in a decade.
By comparison, 6 percent of home buyers in the Charleston area paid cash during the first six months of 2008, and 13 percent in the Beaufort area paid cash during the first seven months.
The national average in 2007 was 7 percent, according to the National Association of Realtors.
So, why does the Grand Strand have such a big portion of cash-payers?
Experts attribute it in part to the vast number of second-home owners.
Across the nation, people who buy vacation homes and investment properties are more apt to pay in cash, at 28 percent and 35 percent, respectively, according to Walter Molony, spokesman for NAR.
“The typical buyer is older, they have equity and they’re looking in part to diversify their portfolio, so they’re looking for places to put their money,” Molony said.
“They’ve built up equity over time so they’re in a much better position to pay cash.”
There’s a large number of baby boomers retiring to the area who have money they’ve saved, inherited or taken away from the sale of real estate in another market, said Tom Maeser, market analyst for the Coastal Carolina Association of Realtors.
Buyers in Brunswick County, N.C., don’t seem to be following the same trend, said the county’s Realtor association president Grady Watkins. He did not have data to show how people are financing their purchases, but said he hasn’t heard from other Realtors of an uptick in buyers shelling out cash.
“There are a few people that are purchasing with cash, but not astronomically higher than in the past,” he said.
Another component is the tightening in the credit markets that makes getting mortgages tougher than in recent years when credit flowed freely, Maeser said.
That’s made people who can pay cash reluctant to go through the process of getting a loan.
Paying up front means a swifter purchase and also gives the buyer more negotiating power, Maeser said.
“You can close very quickly with cash,” he said.
As a result, the percentage of people financing with a mortgage has gone down from its peak at 82 percent (or 5,494 buyers) during the first half of 2006 to 73 percent (2,341 buyers) during the first half of 2008.
That, in addition to the overall slump in sales, has cut into the number of mortgages banks are doling out.
“Anyone tied to the real estate industry right now is suffering through a little spill,” said Travis Minter, senior vice president of Crescent Bank, though he said more real estate is being sold on the Grand Strand than in most S.C. markets.
He suspects a large number of cash-payers are flocking to oceanfront, high-rise condos on the Strand, especially Canadians looking to take advantage of the relatively weak U.S. dollar.
The remaining 5 percent of buyers in the area this year financed purchases using unconventional loans such as those obtained through the Federal Housing Administration, Maeser said.
Copyright © 2008, The Sun News, Myrtle Beach, S.C.
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