Cash sales continue to dominate the recovering Las Vegas housing market—but many realtors in Sin City say it’s a dwindling trend.
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According to a new RealtyTrac report, cash sales accounted for 50.7% of all residential sales in Vegas during the second quarter of 2014—compared to the nationwide average of 37.9%.
“It’s a phenomenal sign to see cash purchases because obviously what that shows is consumer confidence, investor confidence into the future of Las Vegas and being bullish about the overall market,” Randy Char, vice president of sales at One Queensridge Place in Las Vegas said.
Vegas’s cash sales were the seventh highest in the nation among major metropolitan areas. Sin City also had the nation’s second-highest percentage of institutional investors buying homes at 14.4%, second to Atlanta at 15.6%.
The statistics show a rebound in Vegas’s overall housing market, which was one of the hardest hit during the 2008 recession.
However, the Greater Las Vegas Association of Realtors (GLVAR) says current cash sales at the end of the summer have dropped to about 35%. The final numbers haven’t been tallied.
“The time to buy was a year ago,” Brent Dana, owner of Dana Realty Group and a real estate analyst said. “It’s gotten too expensive for investors; now they’ve moved on to New Mexico and Texas and they’re buying cheap there.”
Dana said he expects cash sales to settle at about 30% in the coming months and doesn't anticipate them to return to 50%. He said that's primarily because the market is back to "normal," meaning the average cost of a home in Las Vegas is on the rise. It means investors who buy to rent aren’t making the same profit and are no longer buying homes, freeing up inventory.
George McCabe, a spokesperson for GLVAR, said for the past five years homebuyers who needed to finance struggled to find a house because other customers who were paying cash frequently outbid them. But he said that hasn't been happening as much lately.
Dana also said more homeowners selling as the market recovers provides another reason for an increase in housing inventory. In the luxury housing market, cash sales don’t necessarily pose the same problem because it’s common for customers to pay up-front.
Char sold more than $100 million in property in 2013—with almost 75% of that in cash. He said realtors and banks continue to monitor the housing market and are always prepared for another dip. But, he says for now, it seems the tide has turned.
“We’re still selling at or below replacement costs for these homes. So as long as that continues, I see a healthy boost for the real estate economy here,” Char said.
Murrary Politz and his wife moved from Washington D.C. to Vegas to escape the sometimes cold climate. They paid cash for their home priced at nearly $1 million and feel confident in their investment in the Vegas market.
“I think as more people -- especially the Baby Boomers-- are looking for better weather climates to enjoy life, I think Vegas will continue to be one of the destinations people move to,” Politz said.