Cash sales, institutional investor share dwindle

by 19 Aug 2014
All cash purchases have edged back from a three-year high while institutional investor share of the housing market has dropped to a three-year low.

New figures from RealtyTrac show all-cash sales accounted for 37.9 percent of all sales of single family homes and condos nationwide for the second quarter. The figure is down from a three-year high of 42% last quarter, but is still up from the 35.7 percent cash sales accounted for a year ago.

Participation by institutional investors has also tapered off, with entities that purchase at least 10 properties in a calendar year dropping from 5.3 percent last quarter to 4.7 percent in the second quarter.

"The flurry of purchases by institutional investors and other cash buyers that kicked off two years ago when U.S. home prices hit bottom is finally showing signs of subsiding," said Daren Blomquist, RealtyTrac vice president

Blomquist said the result was a "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 over the past two years in many areas," Blomquist said.

Cash sales appear to be taking place at the very high end and very low end of the market. Cash sales accounted for 67 percent of purchases of homes selling for $100,000 or less, and 45 percent of purchases of homes selling for more than $2 million.

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