Blomquist: u201cAs institutional investors pull back their purchasing in many markets, there is still strong demand from other cash buyers.u201d<@SM>For all-cash purchases, the average sale price and average market value are higher than for institutional-investor purchases.<@SM>As institutional-investor purchases have dropped in some markets like Jacksonville, FL, so has price appreciationu2014dramaticallyu2014which could be cause for concern.<@SM>Cash sales continued to rise during Q1 even when institutional purchases dropped, indicating different types of all-cash buyers are gaining ground in the market. ***Charts courtesy of RealtyTrac.


IRVINE, CA—The share of all-cash property sales reached a new high in the first quarter, but the share of institutional-investor purchases of these properties dropped to its lowest level since Q1 2012, according to RealtyTrac. In a recently released report, the firm says that 42.7% of all US residential property sales in the first quarter were all-cash purchases, up from 37.8% in the previous quarter and up from 19.1% in the first quarter of 2013 to the highest level since RealtyTrac began tracking all-cash purchases in the first quarter of 2011.

In addition, institutional investors—defined as those entities that have purchased at least 10 properties in a calendar year—accounted for 5.6% of all US residential sales in the first quarter, down from 6.8% in the fourth quarter of 2013 and down from 7% in the first quarter of 2013 to the lowest level since the first quarter of 2012.

According to Daren Blomquist, VP of RealtyTrac, “Strict lending standards combined with low inventory continue to give the advantage to investors and other cash buyers in this housing market. The good news is that as institutional investors pull back their purchasing in many markets across the country, there is still strong demand from other cash buyers—including individual investors, second-home buyers and even owner-occupant buyers—to fill the vacuum of demand left by institutional investors.” was unable to reach Blomquist before deadline to discuss how some of these other all-cash buyers are able to purchase homes without leveraging.

Blomquist points out that while institutional-investor purchase share declined in the first quarter in 18 of the top 20 markets for institutional-investor share a year ago, home prices continued to rise on most of those markets, although at a slower pace in many cases. Notable exceptions that could be cause for concern include Jacksonville, FL; and Greensboro, NC.

Along with higher sale prices have come higher rehab costs related to those sales. But, as reported earlier this month, higher single-family rehab expenditures often correspond with better ROI, according to a report from RealtyTrac. The firm reports that BuildZoom, a big-data company that uses building-permit and licensure information to help consumers hire contractors, found that increasing expenditures result in increasing ROI up to the point at which the expenditure represents around 23% of the original purchase price; after that, further expenditures result in diminishing returns, the report says.