Wednesday, June 17, 2009

Multi-Unit Sales: Alternative Financing Dominates

We are halfway through the year and I wanted to see how sales of multi-unit homes were doing.

Here is our first chart:

Rather than be a prophet of doom, I'll speak euphemistically and just say that this chart describes "softer than usual" sales.

This phenomenon can almost exclusively be attributed to banks requiring 30% down payment on investment property. Not to mention the blood typing and pedigree charts they require to get a loan through underwriting these days.

Here is another very interesting chart:

This chart shows what kind of financing is getting multi-unit transactions done. As you can see, conventional financing is cliffdiving. However, cash sales are the highest they have been since the last market trough in 2002. FHA Sales are robust. And most interestingly, as if awoken from hibernation, seller financing now accounts for 20% of the market. That is a huge increase from just 2% in 2007.

There are indications that the bank's tight lending criteria may last several more years as we deal with high unemployment and recession. If that is the case, look for these other forms of financing to increase their share of the market.

If you want to learn more about how seller financing works, give me a call and I will walk you through it. Its heavy on details, but, when done right, it makes for a win-win situation for all involved. I have many happy clients who have used this tool to make things happen.

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