More people buying Salt Lake City condos with cash
More buyers are paying hard cash for condominiums, the Salt Lake Board of Realtors reports.
Data collected by the board show 103 condo units were bought with cash in the first half of this year within an area of Salt Lake City bounded by 300 North, 1000 East, 900 South and 600 West.
A year earlier, the number of condo cash purchases within the same perimeter was 72, the board said.
In the past 90 days alone, half of some three dozen condo sales between 700 North and 900 South were cash transactions, Realtor Babs DeLay said.
Realtors offer several reasons. Strict rules governing Federal Housing Administration loans have made large numbers of condo units ineligible for low-down-payment insured mortgages. That has cut buyers off from a crucial source of low-cost mortgage money, keeping the condo market relatively anemic and giving cash buyers the upper hand in negotiations with sellers.
Interest rates and the stock market are factors, too. Yields on CDs, money-market accounts,Treasuries, savings accounts, checking accounts and other savings instruments have shrunk to almost zero. At the same time, stocks have become riskier and less certain to produce profits. Both trends have led many cash-rich investors to look at real estate, including the condo market.
"If you can buy a condo as an investment, it's a good place to put your money, and it's a good place to live," said Donna Pozzuoli, president of the Realtors group.
DeLay said a third factor, related to the first two, is also pushing up cash sales of condos. Many buyers are college and university students or their parents. With condo prices depressed and dorm fees expensive, they are betting they will save on rents and possibly make money when they graduate.
"The condo market â¦ is now starting to pick up because school is about to start," DeLay said. "Some parents have figured out that buying a condo may be cheaper than paying dorm expenses."
Many of DeLay's condo clients are upperclassmen or graduate students who plan to study at Westminster College or the University of Utah for several years. A doctoral candidate may be on campus as many as six years.
At Westminster, housing fees for upperclassmen start at $2,742 per semester. Mandatory meal plans begin at $1,324 a semester.
University of Utah rates range between $554 a month for a one-bedroom apartment in South Court to $1,965 a month for a three-bedroom Fort Douglas dwelling.
"If your kid is going to be in school for four to six years, you are going to bank on [a condo unit] appreciating, and it being a lot less than paying dorm fees," DeLay said.
What's more, many of the cash deals are bargains right now.
In the area that DeLay tracks, the average list price of condos on the market was $308,665, the average sale-pending price was $207,234, and the average completed-sale price was $209,517. Data accumulated by the Board of Realtors show the median price of condos sold in the first half of 2012 was $164,000, slightly lower than the median during the same time last year.
Dave Anderton, a spokesman for the Realtors group, said demand for condos is likely to push prices higher in a year or two.
"In a lot of people's minds,'' Anderton said, "it's a good investment."