The number of home purchases made entirely with cash fell during the first quarter compared to a year earlier in most of the metro areas throughout the country. As the housing recovery progresses, more traditional buyers are re-entering the market and investor activity is declining.
The types of properties most attractive to all-cash buyers include homes priced in the lower third of the market. According to the article in RisMedia.com, the number of cash buyers fell year on year in 102 out of the 126 metro areas analyzed by Zillow. Out of the top 30 largest metro areas, Miami claimed the largest percentage of all cash buyers at 64.9%. All cash buyers in Tampa accounted for 57.1% of sales, while in Cleveland this figure was 54.2%. The largest areas seeing the lowest percentage of all-cash sales were Portland at 22.9%, Denver at 22.4% and Virginia Beach at 17.4%.
Zillow also looked at the number of cash sales made in the top one third, middle third and bottom third of home values as well as the number of sales made by business buyers and individual buyers in each market. Its analysis found that in 27 out of the top 30 metro areas more than a third of sales of homes in the lowest price tier were made with cash. In three of the top 30 metro areas, more than 80% of sales of homes in the lower-priced brackets were all-cash deals. These metro areas were Tampa, Miami and Detroit.
Real estate experts point out that even though the number of investors is declining in many areas it's still abundantly clear that cash is king, particularly when purchasing homes at the lower end of the market. Unfortunately this does mean that traditional buyers, particularly first-time buyers find it more difficult to compete with all-cash offers. This is especially true for areas where inventory levels are low and competition for lower-priced homes is higher. For most buyers, housing is not so much of an investment as an emotional purchase, and it's good news to see more traditional buyers are able to enter the market as financing conditions begin to ease. Hopefully this should lead the way back towards a more balanced housing market.
The survey also found individual non-business buyers were more likely to buy lower-priced homes with cash during the first quarter, and in 20 out of the top 30 metro areas the percentage of all-cash sales for lower-priced homes was more than double that of sales of homes in the top tier.