People are saying that cash buyers are winning all of the contracts, and no buyers can compete with cash buyers.
Whenever we hear “people are saying” we get curious and suspicious at the same time. People can say whatever, and good stories travel fast.
So, we decided to fact check this.
We looked through all of MLS data for single family home sales statewide, as well as in Washington County. The timeframes being compared were March 2020-March 2021 and March 2021-March 2022. For simplicity, we’ll refer to these periods as 2020 and 2021.
It’s true that the number and percentage of total sales that were cash buyers has gone up. But it hasn’t gone up by very much. Through the state of Vermont, the percentage of cash buyers increased from 28% of total sales to 34%. Washington County saw an increase from 25% to 28%.
Which means that the rest of the sales were financed. You read that right. Statewide, over the past 12 months, 66% of sales closed with financing. In Washington County, 72% of closed single family home contracts had financing.
Conventional financing is really anything with at least a 5% down payment. Technically, a 99% down payment loan (borrowing 1% of the purchase price) is considered conventional financing. People using conventional financing have a little bit to a lot of a down payment. It’s not always 20%.
In 2021, Vermont saw the percentage of sales that were conventionally financed drop from 58% to 55%. Washington County home sales that were purchased with conventional financing decreased from 61% to 56%.
That’s still a lot of people getting financing.
FHA, RD / USDA, and VA Financing
Here’s where the percentages change more dramatically. As a refresher, these are loans that require lower down payments, even as low as 0%. So, for people who don’t have a lot of cash to use for a down payment, these loans are good options.
FHA and RD/USDA loans saw big decreases between 2020 and 2021. But we have to take this with a grain of salt. The percentage changes were big. But the total number of loans were pretty small.
As an example, the % change in RD/USDA loans in Washington County was -71% from 2020 to 2021. Which is a huge decrease! But in terms of the number of houses, that was a decrease from seven sales to 2 sales.
Interestingly, VA loans statewide were pretty stable, not moving much at all, while in Washington County, the number of VA loans increased by 52%. That’s from 27 sales to 41 sales.
On the whole, these low down payment loans represent a relatively small percentage of the total sales in Vermont as well as in Washington County
It IS true that the number and percentage of cash sales is on the rise.
It is ALSO true that easily of all sales statewide are financed. Meaning that they’re getting loans. Meaning that most people who buy houses in Vermont and in Washington County ARE getting loans.
It IS true that the sales figures for lower down payment loans has decreased. Our advice to buyers is if you can get at least enough of a down payment to get into conventional financing, then you’ve got a good chance at getting a house. You may need to make several offers. You may end up competing with a cash buyer.
Now you have the facts.