ALL-CASH SHARE OF U.S. HOME SALES PULLS BACK FROM 3-YEAR HIGH, INSTITUTIONAL INVESTOR SHARE DROPS TO 3-YEAR LOW

Cash Purchases
38 Percent of Q2 Home Sales, Down From 42 Percent in Q1;

  Institutional Investor Purchases 4.7
Percent of Q2 Sales, Lowest Since Q1 2012;

  Report Includes Analyses of Subsequent
Financing on Cash Sales, Bulk Investor Buys

IRVINE, Calif. – Aug. 19,
2014 —
RealtyTrac® (www.realtytrac.com), the
nation’s leading source for comprehensive housing data, today
released its Q2 2014 U.S. Institutional Investor & Cash Sales Report,
which shows all-cash sales accounted for 37.9 percent of all sales of single
family homes and condos nationwide in the second quarter, down from a
three-year high of 42.0 percent in the previous quarter but still up from 35.7
percent in a year ago.

The report also shows that sales to institutional
investors — entities that purchase at least 10 properties in a
calendar year — accounted for 4.7 percent of all sales of single
family homes and condos in the second quarter, down from 5.3 percent in the
previous quarter and down from 5.8 percent a year ago to the lowest level since
the first quarter of 2012.

 

“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, noting that the U.S. median home prices
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.
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 continued. “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.”

 

Cash sales account for larger share
of very high-end, low-end and distressed sales

The report shows that U.S. cash sales hit a recent peak of
45.8 percent of all home sales in the first quarter of 2012, when home prices
bottomed out, but were down to as low as 34.0 percent of all sales in the third
quarter of 2013 before jumping to 36.6 percent in the fourth quarter on the
heels of the rise in interest rates and jumping again to 42.0 percent of all
sales in the first quarter of 2014, when new qualified mortgage rules from the
Consumer Financial Protection Bureau took effect. 

Cash sales in the second quarter were skewed higher
on both ends of the home price spectrum. Cash sales accounted for 67 percent of
purchases of homes selling for $100,000 or less, and cash sales accounted for
45 percent of purchases of homes selling for more than $2 million.

Cash sales represented a larger share of distressed
sales, with 49 percent of bank-owned sales, 61 percent of sales of properties
in the foreclosure process, and 96 percent of sales at the foreclosure auction.
By comparison, non-distressed home sales were 36 percent all-cash.

Cash sales more than half of all
sales in Miami, New York, Detroit, Atlanta, Las Vegas

Among metropolitan statistical areas with a population of at
least 500,000, those with the top six highest percentages of cash sales were
all in Florida: Miami-Fort Lauderdale-Pompano Beach (64.1 percent), Cape
Coral-Fort Myers (62.1 percent), Sarasota-Bradenton-Venice (61.5 percent),
Tampa-St. Petersburg-Clearwater (54.6 percent), Lakeland (53.0 percent), and
Orlando-Kissimmee (52.2 percent). All six metros posted a lower all-cash share
of sales than the previous quarter and a year ago.

Other major metro areas with an all-cash share
among the top 20 highest nationwide were Las Vegas (50.7 percent), New York
(48.2 percent), Detroit (47.7 percent), Kansas City (46.8 percent),
Philadelphia (45.1 percent), and Cleveland (45.1 percent).

Analysis of percentage of cash sales
with subsequent financing

RealtyTrac analyzed more than 7,500 all-cash transactions
for single family homes in Orange County, Calif., between January 2013 and July
2014 to determine what percentage of the properties purchases were subsequently
financed by the buyer.

The analysis found that 10 percent of those
all-cash purchases had some sort of subsequent mortgage taken out by the owner
who purchased with cash. The subsequent financing was recorded on average 136
days after the sale of the property was
recorded.

Institutional investor share
increases in Las Vegas, Jacksonville, Columbus, Miami

Among metropolitan statistical areas with a population of at
least 500,000, those with the highest share of institutional investor purchases
in the second quarter were Atlanta-Sandy Springs-Marietta (15.6 percent), Las
Vegas-Paradise (14.4 percent), Jacksonville, Fla., (12. 5 percent), Memphis,
Tenn. (12.0 percent), and Charlotte-Gastonia-Concord (11.3 percent).

Although Atlanta documented the highest share of
institutional investor sales in the second quarter, its 15.6 percent share was
down from a 20.6 percent share in the first quarter and a 16.5 percent share in
the second quarter of 2013 — following nine consecutive quarters with
year-over-year increases.

The institutional investor share of home purchases
were also down from a year ago in Memphis and Charlotte, but increased from a
year ago in Las Vegas and Jacksonville, bucking the national trend.

Other metro areas among the top 10 for
institutional investor share with increases from a year ago were Knoxville,
Tenn., (10.0 percent compared to 6.9 percent a year ago); Columbus, Ohio (9.2
percent compared to 6.9 percent a year ago); and Miami (8.2 percent compared to
6.7 percent a year ago).

 

Institutional investor breakdown:
price, foreclosure status, financing and bulk sales

The report shows that the second quarter share of
institutional investor purchases was the lowest since the first quarter of
2012, when they represented 4.6 percent of all U.S. home sales. The peak in
institutional investor share of all sales was 6.0 percent in the first quarter
of 2013.

In the second quarter, institutional investors
purchased homes at an average sale price of $147,017, while the average
estimated full market value of the homes purchased was $164,553 at the time of
the sale.

The majority of purchases made by institutional
investors in the second quarter were all-cash (79 percent) and not in any stage
of foreclosure or bank-owned (80 percent). Of the remaining 20 percent, 7
percent were bank-owned, 11 percent were scheduled for a foreclosure auction,
and 2 percent were in default with no foreclosure auction date set.

Analysis of institutional investor
bulk transactions on single family homes

Among the 29,444 single family homes purchased by
institutional investors in the second quarter, 8,856 (29 percent) were bulk
transactions involving multiple properties sold on the same date from the same
seller and to the same buyer. The 29 percent bulk transactions was down from 31
percent in the previous quarter but still up from 19 percent a year ago.

An analysis of the buyers and sellers involved with
the bulk transactions indicated that most of the bulk transactions involve an
institutional investor with multiple corporations purchasing properties that
are consolidating all of those properties under a single ownership name. A
detailed breakdown of buyers and sellers involved in these bulk transactions is
available upon request.

Report
methodology

The RealtyTrac U.S. Institutional Investor & Cash
Sales Report provides percentages of all sales that are sold to institutional
investors and cash buyers, by state and metropolitan statistical area. Data is
also available at the county and zip code level upon request. The data is
derived from recorded sales deeds and loan data. Statistics for previous
quarters are revised when each new quarterly report is issued as more deed data
becomes available for those previous months.

Special note on methodology change in
second quarter of 2014:
RealtyTrac adjusted its methodology for
calculating cash sales, changing how loan coverage was determined and
eliminating data from one of the data providers used in the past.

Definitions

  All-cash purchases: sales where
no loan is recorded at the time of sale and where RealtyTrac has coverage of
loan data.

Institutional investor
purchases
: residential property sales to non-lending entities that
purchased at least 10 properties in the last 12 months.

Report License                                                                               

 

The RealtyTrac U.S.
Institutional Invest & Cash Sales report is the result of a proprietary
evaluation of information compiled by RealtyTrac; the report and any of the
information in whole or in part can only be quoted, copied, published,
re-published, distributed and/or re-distributed or used in any manner if the
user specifically references RealtyTrac as the source for said report and/or
any of the information set forth within the
report.

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Order

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contact RealtyTrac to license bulk foreclosure and neighborhood data or
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Department at 800.462.5193800.462.5193 or datasales@realtytrac.com.

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Ginny.walker@realtytrac.com

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