This has been an unusual year for our local East Bay real estate market for a number of reasons. The most-talked about, of course, are reductions in prices from the peak a couple years ago, the reduced inventory from what we consider the norm, and the existence of distressed properties in our Berkeley-area market, even though they represent only a small percentage of the total.
Buyers in Berkeley, Albany, Kensington and the Rockridge neighborhood of Oakland in particular are faced with a frustrating combination: record low interest rates and tax credits that inspire them to buy, in a market with very limited inventory. One result is familiar: multiple offers. We have become accustomed to anything from three to seven offers being received on any listing that is appropriately priced and decently presented. What we are NOT accustomed to is the preponderance of all-cash offers.
Along the Monterey Peninsula, well-heeled retirees have made all-cash purchases for decades, wanting to avoid mortgage payments when they no longer have a salary stream. But the Berkeley area is not used to seeing more than the occasional all-cash purchase, and usually not at the high end. In reviewing sales from $1M up, over the past three months it was striking to note that 31% of those homes had received all-cash offers.*
It’s not surprising why sellers would accept all-cash offers in preference over other offers, even those with higher face values. Given the difficulties of acquiring jumbo loans, and the risks that they may not close on time or at all, it’s a much safer choice for a seller. The scarcity of jumbo loans may be one of the reasons so many buyers are coming forward with all-cash. Another is the terribly low interest rates that banks are paying to keep money in conservative places. By placing their cash in their home, buyers can literally be sheltered by the results of their labors. But where is all this money coming from? That’s a much harder question to answer. Some of it comes, no doubt, from folks who liquidated their stock portfolios after (or ideally before!) the stock market tumbled. Could it be that there’s just a lot more money out there than people want to admit? Inquiring minds want to know!
*For additional details about the sales within the past 30 days or so, check out the post to the Berkeley Hills Blog.
