Prospective homebuyers bearing satchels full of cash are taking over an increasingly large share of the American housing market, making it tough -- and in some cities nearly impossible -- for families of modest means to compete.
All-cash purchases made up a whopping 45 percent of all residential sales in August, up from 30 percent over the same period last year, according to a report released Thursday by RealtyTrac, an online real estate company. Some of these buyers are local flippers, looking to make quick renovations and sell at a markup a few months later. Others are institutional investors backed by Wall Street money, who typically convert homes into rentals.
The influx of cash buyers in cities across the U.S. poses a steep challenge to ordinary people looking to purchase a home for the old-fashioned purpose of simply living in it. That's because cash buyers have a huge advantage: They don't have to go through the lengthy, more uncertain process of seeking mortgage financing.
"Real people are having a lot of challenges," said Liza Mendez, a Miami realtor who represents both buyers and sellers. "In single-family neighborhoods, buying means going up against investors. You have to be very aggressive, and get there first."
The toughest kind of house to acquire right now is the suburban staple: a three-bedroom, two-bath with a yard in a modest neighborhood, Mendez said.
In Miami, cash-buyers accounted for 69 percent of all sales, according to RealtyTrac. In Las Vegas, the figure was 66 percent, and in Jacksonville, Fla., it was 65 percent.
These figures represent sharp year-to-year increases. Many housing experts predicted that investor interest would slow as 2013 progressed, but that hasn't proved to be the case.
In Atlanta, single-mother Tara Burks began looking for a small three- or four-bedroom house with a backyard nearly two years ago. She has lost at least seven homes to other bidders so far, including at least three to investors paying cash, she said.
Cash buyers accounted for more than half of all Atlanta sales in August, according to RealtyTrac. Institutional buyers acquired nearly one-quarter of all properties sold in the city.
Since January, Burks has been negotiating with Bank of America over a home she would like to buy at a short sale, meaning the current owner has agreed to sell through the bank for less than what is owed on the mortgage.
Burks said she has complied with the bank's requirements -- she is approved for a mortgage and has sent in reams of paperwork -- but she is still "stuck in limbo," awaiting approval.
Limbo isn't a worry for cash buyers, or for sellers looking to quickly complete a transaction. There's no requirement for inspection or an appraisal in such sales, and no chance that financing will fall through.
The ability to obtain financing is increasingly a problem, especially for buyers with less than stellar credit. In a separate study released Thursday, the online mortgage firm Zillow reported that roughly three in 10 Americans have credit scores too low to qualify for a mortgage, even if they offer to make a down payment of 25 percent of the home price.
Zillow analyzed 13 million loan quotes on its mortgage platform in September, and found that borrowers with credit scores under 620 were unlikely to receive even one quote.
The best mortgage rates, meanwhile, were typically reserved for those with credit scores of 740 or higher, compared with 720 in 2010, according to Zillow.
The uptick in investor interest wasn't universal. In Phoenix, prices have shot up -- the median single-family home prices was $194,150 in July, up 30 percent over the year before -- but fewer investors appear to be buying homes, though they are still a significant presence.
Such purchases peaked at roughly 40 percent last July, and have since dropped to about 27 percent, according to a report by an Arizona State University professor.
Nationally, investors are partly responsible for surging home prices. In July, prices in 20 cities were up 12.4 percent over the same period last year, according to the Standard & Poor's/Case-Shiller index.
Though frustrating for new entrants into the housing market, the rapid uptick in prices has proved a blessing for millions of borrowers who owe more on their homes than they are worth. Corelogic, a residential real estate company, recently determined that 2.5 million residential properties returned to positive equity -- meaning they are no longer underwater --in the second quarter of 2013.