This week, real estate appraiser, Curbed graph guru, blogger, newsletter writer, and columnist Jonathan Miller compares cash and financing purchases.
The Washington Post published an article last year titled "8 in 10 Manhattan home sales are all-cash," a statement that was (and still is) hyperbole; the actual figure was 45 percent. The data is worth revisiting, though, and I thought it might be a good time to look at the makeup of Manhattan apartment purchases in regards to cash versus financing. Obviously, there has been some confusion in the past, so I thought it would be helpful to display a year's worth of trend data.
Over the past year, 58 percent of condo sales were made with cash, compared with 40 percent of co-op sales. The condos purchased with cash skewed higher than co-ops because of new development sales and higher prices overall. It's been my experience that the probability of using cash to acquire property tends to rise with prices, i.e. lower-priced properties tend to be more dependent on financing.
This is consistent with the national shortage of first-time buyers. Tight credit conditions, as well as stagnant wage growth and the student debt bubble, all keep them from entering the purchase market normally. An aside: It's interesting (to me) how the market shares of condo with cash buyers align with those of co-ops with financing buyers.
For co-ops that are purchased with a financing, 65 percent have a financing contingency, a clause in the purchase contract that states that the buyer's offer is dependent on him or her being able to secure financing. And while we've seen an uptick in the share of co-op sales made with financing, the use of contingencies has dropped to 59 percent from 70 percent in December.
Condos seem to be less mortgage-dependent overall. Approximately 42 percent of all condo sales had some sort of financing last year, and 54 percent of those sales had a contingency. Their use has been fairly erratic. Condo purchases that used financing saw the use of contingencies peak last November at 64 percent, and has since drifted down to 53 percent in April as the spring market tightened things up a bit.
In other words, co-op buyers tend to use mortgages more often than condos buyers. In the sale of a condo where the buyer uses financing, the contract is less likely to be contingent on financing than a co-op sale with financing.
· All Three Cents Worth [Curbed]
· Miller Samuel [official]
· More Than Half of Manhattan Homes Are Being Bought in Cash [Curbed]