All-cash sales are down in the housing marketDate posted: 12/11/14 05:15:00 AM
Traditional homebuyers need to start making a bigger impact in the housing market, according to Daren Blomquist, vice president of RealtyTrac.
Blomquist said traditional buyers - those buying homes for the first time and those looking to move into bigger homes - need to fill the void left by institutional investors, who have started pulling back from the housing market.
RealtyTrac's third quarter 2014 report showed institutional investors made up just 4.3 percent of all sales of single-family homes and condos in the second quarter of the year. That's down from five percent in the previous quarter and 5.3 percent from a year prior. Institutional investors are those that have purchased at least 10 properties in a calendar year.
"Institutional investors are still actively purchasing single family rentals, but continue to gravitate toward markets where lower-end inventory is still available," Blomquist said in a statement. "Meanwhile, there has been a recent surge in cash buyers in some markets, often coinciding with either a rebound in distressed sales attracting bargain-hunting cash buyers or a booming job market engendering a competitive bidding environment where cash is king."
All-cash sales were down to 33.9 percent of the sales of all single-family homes and condos throughout the nation. All-cash sales accounted for 36.9 percent of sales in the second quarter.
"Cash sales continue to be an important piece of the real estate puzzle right now, representing one in every three home sales nationwide in the third quarter of 2014 and helping to drive up U.S. median home prices 38 percent over the last two and half years," Blomquist said.
All-cash buyers make their way to certain metro areas
Among metro areas with a population of at least 500,000, the top five highest percentages for all-cash sales all hailed from The Sunshine State.
Miami-Fort Lauderdale was top at 59.1 percent. Cape Coral-Fort Myers (55.8 percent), Sarasota-Bradenton-Venice (54.5 percent), Tampa-St. Petersburg-Clearwater (51.1 percent) and Palm Bay-Melbourne-Titusville (50.9 percent) rounded out the top five.
According to RealtyTrac, Miami and Tampa both had a larger share of institutional investors compared to last year. Miami went up 2.3 percent. Tampa went up 1.1 percent from a year ago.
Metro areas with the largest increase in all-cash sales included Houston, San Antonio, Boston, Dallas and Indianapolis.
It's not too shocking to see three cities from Texas make their way to the list. The Lone Star State is flush with cash thanks to solid job growth and strong wages, making it an ideal hotspot for out-of-state workers looking for housing and employment. Houston, San Antonio and Dallas all recorded at least 8.5 percent increases in all-cash sales from the year prior.
The correlation between institutional investors and dropping values
Trulia reported Orlando was one of 22 major metro areas to have a slowdown in home values of at least 10 percentage points. Blomquist said such a drop in value could lead to "bargain-hunting cash buyers" coming into the market. He looks right.
Orlando had the fifth highest share - 11 percent - of institutional investor purchases in the third quarter, according to RealtyTrac.
Other housing data by the numbers
Las Vegas had the largest price slowdown at 218 percent, according to Trulia. The next seven biggest slowdowns of major metro areas occurred in California: Sacramento, Riverside, San Diego, Oakland, Bakersfield, Orange County and Los Angeles all had home price slowdowns of at least 16 percent.
Of the 40 metro areas experiencing price growth acceleration, Trulia revealed the majority of those cities could be found in the Midwest and in the South.
The top metro areas for price acceleration included Dayton, Ohio; Louisville, Kentucky; Akron, Ohio; Palm Bay, Florida; and Toldedo, Ohio. All five of those metro areas recorded a price increase of at least five percent in October 2014 from a year prior.
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