Cash Sales Decline: Now 'only' 1 in 3 Homes; Metro Price Increases Moderate

Institutionalrninvestor participation in the single family residential market fell anotherrnnotch in the third quarter of 2014.  RealtyTracrnsaid today that only 4.3 percent of residential sales in the most recentlyrncompleted quarter went to those investors, defined as those who purchase 10 orrnmore properties in a calendar year.  Thisrngroup was responsible for purchases of 5.0 percent of single family homes andrncondos in the second quarter and 5.3 percent in the third quarter of 2013.  The recent results were the smallest sincernthe fourth quarter of 2010.  </p

The numberrnof transactions that were all cash also declined, from 36.9 percent in thernsecond quarter to 33.9 percent in the third. rnThe all-cash percentage was unchanged from the third quarter of 2013.</p

“Cash sales continue to be an<bimportant piece of the real estate puzzle right now, representing one in everyrnthree home sales nationwide in the third quarter of 2014 and helping to drivernup U.S. median home prices 38 percent over the last two and half years,” saidrnDaren Blomquist, vice president at RealtyTrac. “As institutional investors andrnother cash buyers slow down their purchasing in many markets across therncountry, more traditional buyers – including first-time homebuyers and move-uprnbuyers – will need to increasingly fill in the missing puzzle pieces tornmaintain the momentum of the housing recovery.</p

Blomquist said that whilerninstitutional investors are still actively in the market they are tending torngravitate to areas where there is still low-end inventory available.  He noted that some markets have seen a recentrnsurge in cash transactions and these often coincided with either a rebound inrndistressed sales or a booming job market creating a competitive biddingrnenvironment where cash gives buyers an edge. </p

Cash sales in the third quarterrnskewed higher on both ends of the home price spectrum. Cash sales accounted forrn64 percent of purchases of homes selling for $100,000 or less, and for 41rnpercent of purchases of homes selling for more than $2 million.  Cash sales also dominated in the distressedrnhome market accounting for 54.6 percent of REO and short sales.</p

In other housing news the NationalrnAssociation of Realtors® (NAR) reported that home prices were up during the thirdrnquarter in most of the county’s major metropolitan areas.  Median prices of existing single-family homesrnincreased in 125 or 73 percent of the 172 areas tracked by NAR.  Forty-seven areas or 27 percent saw medianrnprices slip from a year ago. During the second quarter there were median pricernincreases in 71 percent of metro areas.  NAR’s data is based on transactions thatrnclosed during the quarter. </p

While prices were still rising NAR saidrnthat only 16 metros or 9 percent had percentage price increases in the doublerndigit range in the third quarter compared to 54 areas or 33 percent during thernthird quarter of 2013 and nineteen areas in the second quarter of thisrnyear.  </p

Lawrence Yun, NAR chief economist, saysrnhome prices in the third quarter continued to stabilize towards a healthierrnrate of growth. “Home-price gains returned to more normalized levels of low- tornmid-single digit rate of appreciation in many metro markets as inventory levelsrnsteadily increased,” he said. “Moreover, there are a good number of localrnmarkets that are still remarkably affordable with median prices at or underrn$200,000.”</p

Yun adds, “Given the improving laborrnmarket and historically low interest rates, more buyers are anticipated tornenter the market next year.”  </p

NARrnlooked at metro area condominium and cooperative prices in 61 metro areas andrnfound 41 (67 percent) had increased from a year ago while 20 areasrndeclined.  Based on those areas NAR saidrnthe national median existing condo price was $211,000 in the third quarter, 2.7rnpercent higher than a year ago when the median was $205,000.  The national median existing single-familyrnhome price in the third quarter was $217,300, up 4.9 percent from the thirdrnquarter of 2013 ($207,100). The median price during the second quarter of 2014rnincreased 4.2 percent year-over-year.

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