All-cash purchases accounted for almost 43 per cent of all sales of US residential property in 1Q 2014, up from almost 38 per cent in the previous quarter and 19 per cent in 1Q 2013, according to data released Thursday from real-estate data firm RealtyTrac.
Institutional investors — people or companies that have purchased at least 10 properties in a calendar year — appear to be gradually pulling out of the housing market. Investors accounted for 5.6 per cent of all US residential sales in 1Q, down from 6.8 per cent in 4Q 2013 and 7 per cent in 1Q 2013. But while the share of institutional investor buyers declined in 18 of the top 20 markets for institutional investors, home prices continued to appreciate in most of those markets, although at a slower pace.
All-Cash Home Sales US
“Strict lending standards combined with low inventory continue to give the advantage to investors and other cash buyers in this housing market,” said Daren Blomquist, vice president at RealtyTrac.
Investor diversity may be nice, but some analysts warn the sheer volume of investor purchases – be they institutional or bottom feeders – is a problem.
In the pre-meltdown market, about 85 per cent of home sales were individuals purchasing with a mortgage, about 10 per cent were all-cash sales, and about 3-5 per cent were distressed sales.
Not everyone agrees that the housing market is so reliant on cash. The National Association of Realtors says its data suggests the rate of cash sales is lower and on the decline. All-cash sales comprised 33 per cent of transactions in March versus 35 per cent in February and 30 per cent in March 2013, according to data released last month.
Individual investors purchased 17 per cent of homes in March, down from 21 per cent in February and 19 per cent in March 2013, the NAR found. But existing home sales were flat in March, the report found.