The share of private and institutional investors purchasing single-family homes with all-cash fell to 38% of all sales in the second quarter, down from 42% in the first quarter, according to RealtyTrac.
Still, this is up from the second quarter of 2013, when 35.7% of all single-family home sales were all-cash.
Institutional investor purchases accounted for 4.7% of all sales of single-family homes in the second quarter – down from 5.3% from the previous quarter and down 5.8% from the second quarter of 2013 to reach the lowest level since the first quarter of 2012, according to RealtyTrac's Q2 2014 U.S. Institutional Investor & Cash Sales Report.
The firm defines institutional investors as entities that purchase at least 10 properties in a calendar year.
‘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,’ says Daren Blomquist, vice president at RealtyTrac, in a release.
Blomquist notes that the U.S. median home price bottomed out in March 2012.
‘Over the past 10 quarters, cash sales have accounted for 39 percent of all home sales on average, and institutional investor purchases have accounted for 5.3 percent of all home sales on average,’ he says. ‘Prior to that, from 2001 to 2011, the average quarterly cash share was 30 percent, and the average quarterly institutional investor share was 2.6 percent.’
‘This is a classic good news/bad news scenario for the housing market,’ Blomquist continues. ‘The good news is that fewer cash buyers should help loosen up inventory of homes for sale and reduce competitive bidding, giving first time home buyers and other non-cash buyers more opportunities. The bad news is that some of those first-time home buyers 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.’
Cash sales are most prevalent in the very high-end, low-end and real estate owned (REO) or distressed market segments. The report shows that cash sales accounted for 67% of all sales of homes selling for $100,000 or less in the second quarter. At the other end of the spectrum, cash sales accounted about 45% of all sales of homes priced $2 million and above.
As is to be expected, cash sales accounted for a much larger share of distressed sales, with 49% of bank-owned sales, 61% of sales of properties in the foreclosure process and 96% of sales at the foreclosure auction paid for in all-cash. By comparison, non-distressed home sales were 36% all-cash.
Cash sales also tend to be higher in certain regions of the country. Metropolitan areas that saw the highest percentage of cash sales in the second quarter included New York (48.2%), Detroit (47.7%), Kansas City (46.8%), Philadelphia (45.1%), Cleveland (45.1%) and Las Vegas (50.7%) – but these were all topped by six metropolitan areas located in Florida, including Miami-Fort Lauderdale-Pompano Beach (64.1%); Cape Coral-Fort Myers (62.1%); Sarasota-Bradenton-Venice (61.5%); Tampa-St. Petersburg-Clearwater (54.6%); Lakeland (53.0%); and Orlando-Kissimmee (52.2%).
Interestingly, the report reveals that 10% of buyers who purchased homes with all-cash in the second quarter took out a mortgage on the property following the purchase. The subsequent financing was recorded on average 136 days after the sale of the property was recorded, RealtyTrac reports.
Metropolitan areas that saw the highest share of institutional investor purchases in the second quarter included Atlanta-Sandy Springs-Marietta, Ga. (15.6%); Las Vegas-Paradise, Nev. (14.4%); Jacksonville, Fla. (12.5%); Memphis, Tenn. (12%); and Charlotte-Gastonia-Concord, N.C. (11.3%).
Although Atlanta saw the highest share of institutional investor sales, that share dropped from 20.6% in the first quarter and from 16.5% in the second quarter of 2013. This drop came after nine consecutive quarters of year-over-year increases.
To check out the full report, click here.