Homes in Richmond, California. (Justin Sullivan/Getty Images)
Homes in Richmond, California. (Justin Sullivan/Getty Images)

Here’s some quantifiable proof of how the Bay Area housing market is squeezing out the little guy: The percentage of homes going to all-cash buyers soared from 14 percent to 27 percent over the course of last year.

The national numbers are even more dramatic. All-cash buyers were snapping up 18 percent of American homes at the end of 2012; by the end of 2013 they were buying more than 42 percent of them. (Note: All-cash buyers are those who can make the purchase without taking out any loans, not necessarily those who offer up a briefcase full of Benjamins.)

Daren Blomquist is a vice president at RealtyTrac, the company that monitored and reported these numbers. He explains that all-cash buyers in the Bay Area are typically investors looking to flip houses for quick profits as home values spiral upward. In other areas of the country, where homes cost less, large investment funds also get into the action, buying houses for cash and aiming to rent them out for five years or so, then sell.

Where does that leave a regular first-time homebuyer? “Out in the cold, to a certain extent,” says Blomquist. “Given a situation where there’s multpile offers on the same property and one of them is an all-cash offer, that’s usually going to go to the top of the list.”

Here’s a look at how all-cash buying spiked in the Bay Area over the course of the year:

Blomquist says the spike clearly correlates to the moment last summer when interest rates on 30-year fixed mortgages started ticking up. “Some people who were relying on financing were priced out of the San Francisco market when interest rates went up, so that gave even more advantage to cash buyers in the market,” he explains.

Silver lining: At least California was spared from being one of the states where more than half of home sales went to all-cash buyers in December. Those were: Florida (62.5 percent), Wisconsin (59.8 percent), Alabama (55.7 percent), South Carolina (51.3 percent) and Georgia (51.3 percent).

What will it take for this trend to turn around? Frankly, Blomquist says, the market will have to calm down. When home prices stop surging so rapidly and start keeping more in sync with incomes — as they’re showing some early signs of doing — then regular buyers can get back in the running.

All-Cash Buyers Scoop Up Bay Area Real Estate 24 January,2014Grace Rubenstein

  • hoapres

    This is what happens when you allow FOREIGNERS to buy up YOUR country.

    That sounds harsh but it’s the truth.

  • Paul Staley

    I run a program called the Foreclosure Recovery Project in which we buy foreclosed homes, renovate them and then market them exclusively to low or moderate income households. The dominant mode of investor activity in the working class neighborhoods of the Bay Area is not flipping, but buying to hold as rentals. Prices in the neighborhoods most devastated by the subprime collapse and subsequent foreclosure crisis have doubled since the trough in 2009-2010, but a substantial portion of the home sales in those areas were sold for investment, not occupancy. The scale of the resulting income transfer is staggering: millions of dollars in rent payments that could have been paying down a mortgage, and millions more in missed equity accumulation as home prices have rebounded. A tremendous opportunity to facilitate home ownership at cyclically low prices and historically low interest rates has been squandered.

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