All-cash buyers have grabbed up a higher percentage of homes in the past 12 years in Merced County than in much of the rest of the state, which means wealthy out-of-the-area investors are having an effect on the local housing market, according to numbers from a real estate tracker.
More than 40 percent of the homes sold in Merced from 2005 to 2017 were purchased by all-cash buyers, according to the report from ATTOM Data Solutions. The numbers are higher in Planada (42 percent) and Le Grand (44 percent).
In 2006, about 10 percent of California single-family homes were purchased in all-cash transactions, according to real estate data. A decade later, nearly 25 percent of California’s extremely tight housing inventory is unlikely to go to households of moderate-income families who need a mortgage to buy a home.
"Sellers want to go with cash if it's available rather than someone who doesn't have the cash and they have to go out and get a loan, because the loan process is protracted," said Terry Ruscoe, owner of Merced Yosemite Realty.
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Loans also require an appraisal, which can bring down how much the seller can get, Ruscoe said.
Homes in Atwater and Los Banos were purchased with cash more than 30 percent of the time, the report says.
The all-cash buyers were at their peak during the Great Recession, the numbers show. Ruscoe noted that loans were also much harder to get at that time, leaving many buyers without much choice than to buy with all cash if they had the option.
The California Association of Realtors estimates international buyers are more than twice as likely to pay in cash as domestic buyers. Some are rich enough to avoid the need to finance a home, or prefer buying California real estate to investing in the stock market.
Private investment firms snapped up cheap homes during the foreclosure crisis. At one point more than one in three California homes was being purchased with all-cash. Merced County saw three out of four existing homes go into foreclosure in 2008, according to Corelogic, a real estate tracker.
Merced County often sees wealthy investors from the Bay Area buying homes, according to local brokers.
But experts have come to see foreign buyers as a bigger force in the market than initially thought, and a contributor to the rise in single-family rentals California has experienced in the past 10 years.
“My guess would be that it’s flipped and that foreign buyers are now having a bigger impact than institutional investors,” said Daren Blomquist, senior vice president at ATTOM. “They aren’t a huge percentage of buyers, but certainly they are one of the reasons that the California market has bounced back so strongly from the recession.”
The California Association of Realtors estimates that 3 percent of last year’s purchases went to international buyers. Their data relies on a survey of realtors, and could be inaccurate.
“For one thing, the survey is conducted in English,” said Oscar Wei, senior economist for the California Association of Realtors. “So if you have Chinese buyers and Chinese agents, they may not necessarily want to participate in a survey written in English.”
He estimates 5 percent to 10 percent of the state’s single-family housing stock could be owned by international buyers.