[quote=CA renter]
1. IMHO, one of the biggest reasons we’re seeing a lot of cash buyers is because interest rates are being held so painfully low. Investors are able to buy rentals or flips, and make a MUCH better return than what they are currently getting in savings or fixed income. If rates rise, I believe a lot of this money will disappear, as the housing market will have to compete with better returns on fixed income and savings.[/quote]
I think you have that backward. If rates rises and assuming price doesn’t rise along w/ rates, I foresee even more cash buyers in areas where there are a lot of cash buyers right now. In Fresno for example, where there are a lot of cash deals for investment properties, right now, places that rent for $1k/month is selling for $60-90k. Assuming current rates for 5.25%, PITI is ~$400/month. If those properties doesn’t rise with rates and rates goes up to 8%, the PITI will be ~$500/month. The 3% increase in interest might push some investor to pay for the properties in cash instead of financing at a low interest. If they pay cash for that $60k-$90k, their ROI is between 13-20% before any tax write off or additional 1 time costs. Now, lets assume price goes down a little bit as rate rises, the ROI will be that much higher. So, I can see even more cash buyers.
