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Quite true, of course. "Downsizing" usually means that the physical size of the house or dwelling (measured in square feet) becomes smaller. However, what you described I think of as "financially downsizing", meaning that one has less money tied up in the house and has "liberated" a bunch of money to use for other things or to increase the size of the more liquid portion of the nest egg.
If someone sells a $500,000 house in an expensive part of New Jersey (just to continue with your use of New Jersey as an example) and buys a nearly identical house in Texas or Tennessee (or any number of other less expensive places) for $250,000, then the person doesn't really have to worry so much about having a physically smaller house to minimize the cost of utilities and maintenance.
It's still a type of downsizing, as I see it.
Bada Bing so very true and happening daily just consider MOBs new thread on metro area costs and the magic of transplanting becomes clearer.
How many of the homes are actually "people" buying them vs. companies buying them and turning them into rentals?
When I lived in Atlanta in 2012, large numbers of homes were being scooped up by investment companies who would then do minimal repairs and touch ups and put them on the rental market.
From the research I have done so far into the cash sales for the first quarter of the year . . . it appears that the majority of the purchases were NOT investment properties.
Investors have been taking advantage of the special financing available through the federal government and NOT using cash. I started researching this last October, and found that many properties in my area are being purchased as rentals and also as Section 8 housing, through use of programs that allow the investor to make a small downpayment. Investors traditionally use OPM, not their own.
The way to protect one's investment if paying cash for a foreclosed (bank owned) multi-family property (townhome, condo, villa) would be to purchase properties with covenants that specify OWNER OCCUPIED ONLY. That way, a retired couple doesn't need to worry about investors having purchased other units which will be rented out as Section 8.
Some of the reports I have read stated that a portion of the properties purchased with cash during the first quarter were bought by foreign nationals and immigrants, with the majority in California being purchased by Chinese nationals and immigrants. More below:
The top five markets for cash sales were in Florida, which experienced one of the biggest property crashes after the 2008 recession: Cape Coral-Fort Myers (74%), Miami (67%), Sarasota (65%), Palm Bay (64%), and Lakeland (62%). Other major metro areas where over half of all property sales were done in cash included New York (57%), Columbia, S.C., (56%), Memphis, Tenn. (55%), Detroit, Mich. (53%), Atlanta (53%) and Las Vegas (52%). Many high-end homes are also purchased with cash and buyers in competitive areas where inventory is low are more likely to offer cash.
One of the things to consider in looking for that cheaper area is that in short time the cost can rise very steeply. Many are not financed by industrial type tax bases ;so with need for infrastructure as they grow they need tax base increases. Boomer type movement in former small town can mean you need to be able to afford this increase in infrastructure as needed. Some such as Texas have property taxes and provisions for over 65 but if needed they will find fees or other taxes as needed. You really need to do your home work as based on more fixed income it can mean ever rising COL as others who can afford move in; as many a small town has learned. Still likely to be cheaper than SF in your lifetime but expect rising cost overtime in planning.
I just heard recently that in the Tri County area (Miami-Dade, Broward and Palm Beach Counties) that cash sales account for 69% of all purchases.
Since I'm in one of those counties and also a mortgage broker, I can tell you that we do see cash sales but also we have a delayed financing program where if someone buys a property, we can turn around and do a refinance from day 1 to 6 months from date of purchase and take the NEW appraised value.
So, IOW, if someone buys a short sale, goes in, does a little work and it appraises higher, it's a good deal but you've got to have the cash in the first place.
The problem I see is that the first time homebuyer is being left out and that's my concern.
On another note, we've had a few grand openings of 55 plus communities and sales are booming (starting at $260K plus plus plus)
When they say "sales were cash" they do NOT mean buyers are paying cash for their homes. It means that sale is not dependent on financing. BIG difference.
I would technically be a "cash" buyer because I did not buy with that stipulation. But I have a regular mortgage.
Now, granted, some are "cash" buyers, but the vast majority of buyers do not use cash, even if they can afford cash, because it makes little financial sense in most cases. A 15 year is 3.5%, if your investments can't do better than that, you're doing something seriously wrong.
This has been happening in CA bay area as well. I have a Realtor friend and she is telling me all the buyers with loans having hard times because all cash buyers are outbidding them. We are talking about a market that is more than 500,000 in home prices. AAAmmmzing :-)
Analysts have come up with several different spins on why cash was king for home sales in the first quarter of 2014.
Depending on source, the reasons vary from: competition, stricter mortgage lending practices, first time home buyers, investors, and boomers down sizing.
With Florida leading the country in cash sales for the first quarter, I tend to think the market is being driven by retirees or folks looking towards retirement -- and who are downsizing and paying cash so they won't have a mortgage going into retirement.
(excerpt)
Once riddled with foreclosures, Cape Coral, Fla., had the highest level of all-cash deals at nearly 74% of first quarter sales, according to RealtyTrac. Four other Florida cities followed: Miami (67%), Sarasota (65%), Palm Bay (64%) and Lakeland (62%)
There has been much discussion about Boomers "not being prepared for retirement." I think this is one strategy that is putting Boomers in a better position to deal with retirement financial restrictions. Statistics show that the majority of folks at retirement age right now do not have the amount of savings typically projected for survival into old age. Without a mortgage -- and no rent to pay -- Boomers are creating a strategy which will allow them to live off social security and modest savings, since most new retirees, other than government employees, do NOT have pensions.
I'm not sure one can assume that most of these cash buyers are American boomers. The article states that in California, and coastal cities in Florida, and the NE ( Miami, Boston), those cash buyers are foreign visitors. It's well known in Miami, for instance, that many of the cash buyers for properties are the well-heeled from Latin and South America, and the article states that as well. In CA, it's Chinese nationals buying up those properties and paying cash.
Analysts have come up with several different spins on why cash was king for home sales in the first quarter of 2014.
Depending on source, the reasons vary from: competition, stricter mortgage lending practices, first time home buyers, investors, and boomers down sizing.
With Florida leading the country in cash sales for the first quarter, I tend to think the market is being driven by retirees or folks looking towards retirement -- and who are downsizing and paying cash so they won't have a mortgage going into retirement.
(excerpt)
Once riddled with foreclosures, Cape Coral, Fla., had the highest level of all-cash deals at nearly 74% of first quarter sales, according to RealtyTrac. Four other Florida cities followed: Miami (67%), Sarasota (65%), Palm Bay (64%) and Lakeland (62%)
There has been much discussion about Boomers "not being prepared for retirement." I think this is one strategy that is putting Boomers in a better position to deal with retirement financial restrictions. Statistics show that the majority of folks at retirement age right now do not have the amount of savings typically projected for survival into old age. Without a mortgage -- and no rent to pay -- Boomers are creating a strategy which will allow them to live off social security and modest savings, since most new retirees, other than government employees, do NOT have pensions.
How many of the homes are actually "people" buying them vs. companies buying them and turning them into rentals?
When I lived in Atlanta in 2012, large numbers of homes were being scooped up by investment companies who would then do minimal repairs and touch ups and put them on the rental market.
And, as the article mentions, a number of those cash buys are actually from foreign nationals from Latin and South America, and China.
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Cash buyers in my area
