South Florida housing market dominated by cash buyers

Buyers wealthy enough to pay in cash are the driving force in the $200 billion housing market across Broward and Palm Beach counties — making it harder for people who need financing to find a home.

Many of the cash buyers are domestic or foreign investors pouring their money into inexpensive real estate as bargains have become more plentiful following the housing crash.

Five years ago, near the height of the boom, cash deals were rare, representing just 10 percent of all sales in Broward and 19 percent in Palm Beach County, according to the Miami Association of Realtors.

 

Now, cash deals are so prevalent that real estate agents practically have investors on speed dial, with some buying five and 10 properties at a time, said Mike Pappas, president of the Keyes Co.

More than 60 percent of the September transactions in Broward and Palm Beach counties were from buyers paying cash – that's up in both counties from a year ago and twice the national average, according to the Miami Realtors' group, which compiled data from local multiple listing services.

Some sellers' agents tell potential buyers taking out mortgages not to even bother placing offers on the homes.

"The cash buyer is the market right now," Pappas said. "It's amazing to see the number of cash transactions in the marketplace. It boggles your mind."

The surge in cash sales seems counterintuitive, given that mortgage rates are below 5 percent, making financing an attractive option.

But lenders tend to give the best rates only to people with steady jobs and pristine credit, meaning first-time buyers and others struggle to qualify for financing.

Lenders and traditional sellers typically will take less money for cash deals "because they don't have to go through the rigmarole" of waiting for buyers to qualify for mortgages, said Claire Sheres, a real estate agent in southern Palm Beach County.

"For a buyer looking to purchase a place to live, this is a very frustrating process," said Terry Story, another agent.

Luis Rios figured he had found the perfect three-bedroom home in Pompano Beach and offered $5,000 above the $64,000 asking price.

But Rios, 55, who needed financing, lost the home to an investor paying cash.

"I thought by paying more that I had the upper hand," he said.

While home and condo sales nationwide have been lackluster this year, activity in South Florida has been robust, in part because investors paying cash are attracted to the region's affordable prices and favorable climate, analysts say.

Sales in Broward and Palm Beach counties have exceeded 1,000 homes a month for much of 2011, according to the Florida Realtors.

Just in the first nine months of this year, agents sold more condos in Broward and Palm Beach counties than in all of 2010. Broward easily will exceed the 13,253 sales from 2005, the year Florida Realtors began keeping condo sales statistics.

In some financially troubled condos, banks won't lend at all, meaning that any sales must be cash.

With values down by more than half from their 2005 peaks, investors swoop in to buy low-priced foreclosures and "get better returns on their money today than in a bank," Pappas said.

Many investors aren't interested in "flipping" the properties, as they did during the housing boom. Now they want to hold and lease because of strong demand for rental units.

Herman Goldszlager has paid cash for 17 properties during the past few years. In June, he spent $55,000 for a three-bedroom townhome in Davie and poured $10,000 into renovating it.

Maintenance, taxes and insurance cost $550 a month, but he rents it to a family for $1,300 – a $750 profit.

"There's a big pool of renters out there," said Goldszlager, 59. "When I put an ad in the newspaper, I'll get 15 to 20 calls."

It's possible that South Florida cash sales could slow if the U.S. economy continues to languish and the economies in Latin America and Europe take a turn for the worse, said Chris Lafakis, an economist covering Florida for Moody's Analytics in West Chester, Pa.

Even so, cash buyers likely will dominate the market until banks make financing more available to the general public, said Jim Heidisch, president of the Realtor Association of Greater Fort Lauderdale.

"At that point buyers will stop looking at cash as king and start taking out a mortgage like everybody else," he said.