All-cash sales of homes reached a record high in the first quarter, rising to 42.7% of all sales from 37.8% in the previous quarter and from 19.1% in the first quarter of 2013, according to RealtyTrac's Q1 2014 U.S. Institutional Investor & Cash Sales Report.
Institutional investors – defined by RealtyTrac as entities that have purchased at least 10 properties in a calendar year – accounted for 5.6% of all 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.
‘Strict lending standards, combined with low inventory, continue to give the advantage to investors and other cash buyers in this housing market,’ says Daren Blomquist, vice president at RealtyTrac, in a release. ‘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.’
The report was released the same day that the National Association of Realtors reported that all-cash purchases rose from 29% in 2012 to 31% in 2013 and 33% in the first quarter of 2014 – despite the fact that investor activity edged down from 20% of sales in 2012 to 19% of sales in both 2013 and the first quarter of this year. However, the two reports use different methodolgies.
‘While the 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 appreciate in most of those markets, albeit at a slower pace in many cases,’ Blomquist says, in reference to the RealtyTrac report. ‘There are a
couple notable exceptions that could be cause for concern: Jacksonville, Fla., where the institutional investor share of purchases was down to 13.5 percent in the first quarter compared to 18 percent a year ago and where median home prices decreased one percent from a year ago in March after 15 consecutive months of annual increases; and Greensboro, N.C., where the institutional investor of purchases was down to 6.4 percent in the first quarter compared to 10 percent a year ago and where median home prices decreased eight percent from a year ago in March following 14 of 16 months where median home prices
increased annually.’
Cash sales accounted for more than half of all sales in Miami, New York, Detroit, Atlanta and Las Vegas in the first quarter, according to RealtyTrac.
Among metropolitan statistical areas with a population of at least 500,000, those with the top five highest percentages of cash sales were all in Florida: Cape Coral-Fort Myers (73.6%), Miami (67.1%), Sarasota (65.1%), Palm Bay (64.1%) and Lakeland (61.8%).
Other major metro areas with more than 50% all-cash sales included New York (57%); Columbia, S.C. (56.1%); Memphis (54.9%); Detroit (53.5%); Atlanta (53.2%); and Las Vegas (52.2%).
According to RealtyTrac, about 15% of all-cash purchases in the first quarter were properties in the foreclosure process, and 10% were bank-owned properties.
About 11% of all-cash purchases in the first quarter were to institutional investors.
And about 52% of all-cash purchases in March (most recent month's data only available for this metric) were sold to buyers with a different mailing address than the property address – indicating investors or second-home buyers. That compares to 34% of all sales – cash and financed – sold to investors or second-home buyers in March.
The average sales price of an all-cash purchase in the first quarter was $207,668 – 13% below the average estimated full market value of the properties that were purchased: $237,900.
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