Cash Sales Saved Housing Market -CoreLogic

“The death of cash is greatlyrnexaggerated.” CoreLogic concurs with that quote from Mark Twain inrnan article analyzing the impact cash sales has had on the real estaternmarket over the last few years. The company says that there has beenrna surge in cash on corporate balance sheets during the recession tornthe highest levels ever recorded and a rapid expansion of currency inrncirculation; real estate has been heavily impacted by this.</p

CoreLogic’s article “Real Estate andrnthe Impact of Cash Sales” is one of several views of the currentrnreal estate environment in its newest issue of MarketPulse. The publication this month also includes “Fire Burn and CaldronrnBubble” which looks at whether there is a real estate bubble, andrn”Recovery, a Long Row to Hoe,” as well as summaries and recaps ofrnother CoreLogic’s other recent research and data releases.</p

Cash sales of real estate have risen inrnevery sale segment and across a large number of geographies. CoreLogic says, and while these sales heavily contributed to thernstabilization and recovery of the residential market, cash sales havernpeaked and are now receding. First-time and trade-up homebuyers willrnhave to step up to replace cash buyers if the recovery is going torncontinue to recover.</p

Cash sales were fairly steady in thernearly 2000s, averaging 25 percent of home sales but as the marketrncollapsed in 2007 and 2008 the share of cash sales rose swiftly,rnfirst in the bank-owned real estate area (REO) and then everywhere. The overall market share of cash stabilized in 2010 and has mostrnrecently been slowing declining but REO cash transactions continuedrnto rise proportionately through 2012 even as REO sales themselvesrndeclined. In May 2013 cash sales had a 39 percent share, down fromrn40 percent a year earlier, an annual decrease that has occurred forrn19 consecutive months. Among non-distressed sales the share was alsorn39 percent but that was a 2 percentage point drop from a yearrnearlier. </p

</p

It was cash sales that provided thernfloor for prices in 2009. Both cash and mortgaged sales peaked inrn2005 but then mortgaged sales fell 78 percent to a January 2011rntrough whereas cash sales ultimately declined 47 percent and bottomedrnout in January 2009. Since then cash sales have risen 39 percent,rnmore than triple the 10 percent rate of mortgaged sales. </p

Without cash sales overall sales todayrnwould be much lower and the price declines would have been worse. More recently cash sales have helped fuel price increases</bdramatically in several boom and bust markets. Median prices forrncash sales are up 24 percent from a year ago while prices of salesrngenerally have increased 15 percent.</p