There’s a chunk of north Minneapolis where if you’re thinking about buying a house, you better bring cash. That’s not necessarily a bad thing, unless you’re a first-time homeowner trying to compete against investors or a city trying to promote home ownership.
Here’s the area we’re looking at: Multiple Listing Service area 305
Last year, nearly two of every three transactions in that area were cash deals, a pace that was off the charts compared to other areas and astronomical compared to 2005 and 2006 when cash deals accounted for less than six percent of the sales.
Realtor Aaron Dickinson first mentioned this in a blog post a few weeks ago. He crunched some data for us using Multiple Listing Service statistics for all the deals in all the neighborhoods for the past five years. There are other pockets in Minneapolis where cash deals made up 40 to 50 percent of the house transactions last year.
Investors are the likely buyers for many of the homes. People who bring cash can get good deals, no doubt. The average price of a home in the Minneapolis-North MLS area was just under $55,000, or $36 a square foot in 2009, according to data collected by the Minneapolis Area Association of Realtors, the lowest of any tract in the Twin Cities.
So, is cash on the barrel a problem when it comes to home sales? Depends on your goals.
“Investor competition is a main challenge in bringing foreclosed properties on the market to homeowners,” Thomas Streitz, director of housing policy and development for Minneapolis, told a U.S. House subcommittee a few weeks ago.
The city, he said in written testimony, is trying to prevent the turnover of single family homes to rentals but sellers are taking lower cash offers over the higher offers of developers working with the city’s Neighborhood Stabilization Program.
“A homeowner with a FHA approved mortgage with a 30 day approval time does not compete with cash-in-hand private investors.”
Can the interests of investors with cash to spend co-exist with the policy goals of putting people in their first home and stabilizing neighborhoods? How does a young person who needs to get a mortgage compete for an affordable house with an investor who can simply cut a check?