Don’t Ignore All Cash Buyer’s Behaviors

It’s no secret that cash is king despite the fact that the dollar is worth only a mere fraction of itself.  And cash buyers of Manhattan and Hampton’s real estate have been dealt a ROYAL flush!

If you are one of the “borrowing” majority in the market to buy a home, you are probably watching interest rates on a daily basis and anticipating their rise with each passing hour. Your search for the perfect home is likely fraught with anxiety surrounding interest rates and what your monthly payment will be should you not locate your home prior to the next uptick.  You are probably doing calculations on a regular basis to determine if it makes more sense to buy now at current low rates or wait for prices to come down and purchase at a higher interest rate.  Everyone’s specific situation is unique and their isn’t one good answer for the masses.

But if you are an all cash buyer, the market is your oyster.  There is no sense of urgency surrounding interest rates so the cash buyer can take their time based on where they believe prices are heading and perhaps capitalize on the impending increase in the cost of borrowing.  It is a relatively simple formula: as the cost of borrowing increases, borrowers can afford less and therefore prices must come down.  A great time to be the all cash buyer.

Now in Manhattan we have the added element of inventory which often serves to prop up or bring down prices.  For instance, it is entirely possible that as interest rates increase, inventory will simultaneously decrease and offset any additional price depreciation. Conversely, we could have a sudden pop in inventory as sellers try to unload their homes to that largest pool of interest rate sensitive buyers.  The latter seems to be where we are in today’s market with contract signings up significantly in the past couple of weeks.

So I have no crystal ball but from anecdotal evidence I can tell you that we have a few clients right now who are sitting on the sidelines with an abundance of cash just waiting for the opportunity to pounce on the right property.  Many of these clients have decided to rent very pricey homes (in excess of $20,000/month) in lieu of buying in today’s market with hopes that in a couple of years, interest rates will be considerably higher and prices will have come down. Only time will tell if their bet pays off.

In the meantime, many are taking advantage are still low interest rates, others rent, and some have decided that a move is just not in their near future.  I’m reluctant to say this but for many, now is indeed the time to buy.  And for sellers, there is a window of opportunity that exists RIGHT NOW that isn’t going to last forever.  Just ask the all cash buyers.