All-Cash Sales May be Dwindling

During the second quarter of this year the number of all-cash sales accounted for 37.9% of single-family homes, a 4.1% drop on figures for the first quarter where cash sales accounted for 42% of sales. The figures for the first quarter marked a three-year high for all-cash sales.

Even though the second quarter showed a drop, the numbers of cash sales were still higher than those seen a year earlier. In the second quarter of 2013, 35.7% of sales were for cash, according to figures from the US Institutional Investor & Cash Sales Report from RealtyTrac. The decline in the number of cash sales is only slight, but the percentage of sales to institutional investors that normally purchase at least 10 properties per year dropped to 4.7% during the second quarter. This is the lowest level seen since the first quarter of 2012. Around this time there was an increase in the number of purchases by international investors and the cash buyers as housing prices finally hit rock bottom, but now there are signs these purchases may be tailing off.

The article in housingwire.com goes on to point out that over the past 10 quarters sales of homes for cash have accounted for 39% of all purchases while purchases by institutional investors have accounted for 5.3% of home sales. From 2001 two 2011, all-cash sales accounted for 30% of the average quarterly figures while institutional investors accounted for 2.6% of the market. Apparently all-cash sales accounted for a large proportion of distress sales and lower price properties, as well as a number of high-priced properties.

The RealtyTrac report shows that cash sales in the US recently peaked at 45.8% of all home sales during the first quarter of 2012, but that this figure dropped to 34% during the third quarter of last year, before rising slightly to 36.6% in the final quarter. When the new qualified mortgage rules came into effect at the beginning of the year then the percentage of all cash sales increased to 42%.

During the second quarter of this year the number of cash sales was higher at both ends of the real estate market. Some 67% of property sold for $100,000 or less was bought for cash, while cash sales for homes selling in excess of $2 million accounted for 45% of all purchases. In addition 61% of the properties in foreclosure and 49% of bank owned properties were bought for cash. Some 96% of sales at foreclosure auctions were for cash, while in comparison to just 36% of non-distressed home sales were bought without the need for a loan.