With national foreclosure rates continuing to rise, home affordability gets even better for homebuyers. The high level of housing affordability also resulted in more cash purchases in the housing market, with Minnesota as one primary example.
In January, 27% of the total pending sales of houses in the Twin Cities, including Minneapolis foreclosed homes, were accounted for by all-cash transactions. This means that one transaction out of every four purchase deals was paid for using cash. The figure is reportedly five times more than the rate for such deals recorded during the period of 2006-2007. During those years, all-cash agreements in the housing market only accounted for four to five percent of all sales.
The increasing number of foreclosed homes in Minnesota that are being purchased using cash is also happening at the national level, where 28% of last year's total home sales were executed through cash deals. The National Association of Realtors reported that this figure is way up from the 2008 average of 14%. According to real estate experts, the trend is mainly due to the high level of affordability in the home market.
According to them, the rise in national foreclosure rates has cut down the values of houses all around the U.S., making it easier for buyers to come up with cash to pay for their residential purchases. In the Twin Cities, prices of houses have declined to $140,000 in January 2011 compared with the January 2008 price of $205,000, according to data issued by the Minneapolis Area Association of Realtors (MAAR).
For foreclosure properties, median price in January 2011 was at $108,000, representing an 8.4% drop from the January 2010 median price of $117,950. Looking at foreclosure search rates, areas with the highest number of distressed properties often have the highest level of housing affordability. Transactions, such as foreclosed property auctions and short sales, drag down the prices of homes in most areas.
In the Twin Cities last January, MAAR reported that more than 50% of sales transactions were accounted for by foreclosed home auctions and short sales. Analysts stated that national foreclosure rates have a lot to do with home price movements and that the high level of affordability will likely continue for the rest of 2011.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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