All-Cash Share Down From 3-Year High

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IRVINE, CA—Cash purchases represented 38% of home sales nationwide in the second quarter, down from 42% in Q1, according to a report from RealtyTrac. In addition, cash sales skewed higher on both ends of the home-price spectrum in Q2, the firm says.

The report shows that all-cash sales accounted for 37.9% of all sales of single-family homes and condos nationwide in the second quarter, down from three-year high of 42% in the previous quarter, but still up from 35.7% a year ago. Cash sales hit a recent peak of 45.8% of all home sales in the first quarter of 2012, when home prices bottomed out, but were down as low as 34% of all sales in the third quarter of 2013 before jumping to 36.6% in the fourth quarter on the heels of the rise in interest rates and jumping again to 42% of all sales in the first quarter of 2014, when new qualified mortgage rules from the Consumer Financial Protection Bureau took effect, RealtyTrac reports

According to Daren Blomquist, VP of RealtyTrac, “The flurry of purchases by institutional investors and other cash buyers that kicked off two years ago when US home prices hit bottom is finally showing signs of subsiding. Over the past 10 quarters, cash sales have accounted for 39% of all home sales on average, and institutional-investor purchases have accounted for 5.3% of all home sales on average. Prior to that, from 2001 to 2011, the average quarterly cash share was 30%, and the average quarterly institutional investor share was 2.6%.”

Blomquist adds that this scenario is a “classic good news/bad news scenario for the housing market. The good news is that fewer cash buyers should help loosen up inventory of homes for sale and reduce competitive bidding, giving first-time homebuyers and other non-cash buyers more opportunities. The bad news is that some of those first-time homebuyers and other non-cash buyers may already be priced out of the market thanks to the rapid run-up in home prices of the past two years in many areas.”

As GlobeSt.com reported in May, tapping self-directed IRAs and appealing to friends and family are two ways that smaller all-cash buyers making residential purchases, Blomquist told us. As fewer institutional buyers were making residential purchases, smaller all-cash investors were moving in.

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