All-Cash Share of U.S. Home Purchases in May Drops to Lowest Level Since November 2009

Home Prices Fall For Second Straight Month After Three-Year Run-Up;
Distressed Sales Discount at New High of 43 Percent

IRVINE, Calif. – July 2, 2015 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its May 2015 U.S. Home & Foreclosure Sales Report, which shows 24.6 percent of all single family home and condo sales in May were all-cash purchases, down from 28.5 percent in the previous month and down from 30.4 percent a year ago to the lowest level since November 2009.

The cash sales share in May was close to its long-term average going back to January 2000 of 24.8 percent and well below its recent peak of 42.2 percent in February 2011. The share of institutional investors — entities purchasing at least 10 properties in a calendar year — dropped to 2.4 percent of single family home sales in May, a record low going back to January 2000, the earliest month with data available.

“For the potential first time homebuyer or move up buyer this is a good time to move ahead,” said Craig King, COO at Chase International brokerage, covering the Lake Tahoe and Reno, Nevada, markets. “Interest rates remain historically low, and the outlook for price appreciation is great. The competition in the market place is also different.  While inventory is tight many investors have dropped out of the market and cash deals are not as prevalent as they were. Even in multi-offer situations much has been equalized. This is great news for first time buyers.”

The median sales price of residential properties — including both distressed and non-distressed properties — that sold in May was $173,900, up 4 percent from the previous month but down 1 percent from a year ago. May was the second consecutive month where median sales prices nationwide were down on a year-over-year basis following 36 consecutive months of year-over-year increases.

“Distressed sales in May represented a significantly smaller share of a growing home sales pie as an increasing number of non-distressed sellers continued to cash out on the equity they’ve gained over the last three years of rising home prices,” said Daren Blomquist, vice president at RealtyTrac. “But those distressed sales are still acting as a drag on home prices, selling at a median price that is 43 percent below the median price of a non-distressed sale — the biggest gap we’ve seen since we began tracking that distressed discount in January 2006.

“As housing transitions from an investor-driven, cash-is-king market to one more dependent on traditional buyers, sales volume has been increasing over the last few months and is on track in 2015 to hit the highest level we’ve seen since 2006,” Blomquist continued. “And while sellers this spring are realizing the biggest average home value gains since 2006, home price appreciation is softening as the supply-and-demand balances tip more in favor of buyers and as banks began to clear out some of their more highly distressed foreclosures that sell at scratch-and-dent prices.”

The median sales price of non-distressed residential properties that sold in May was $205,00.Meanwhile the median sales price of distressed residential properties — those that were in some stage of foreclosure or bank-owned — that sold in May was $116,192, up less than 1 percent from the previous month but down 2 percent from a year ago.  May was the first month with a year-over-year decrease in distressed median sale prices following 13 consecutive months with year-over-year increases.

The median sales price of a distressed residential property was 43 percent below the median sales price of a non-distressed residential property in May, the biggest distressed discount since January 2006 when RealtyTrac first began tracking this metric.

Share of distressed sales drops to new low

The share of distressed sales dropped to a new low of 10.5 percent in May, down from 15.4 percent in April and down from 18.3 percent a year ago to the lowest level since January 2011 — the earliest that RealtyTrac has data for this metric.

“The South Florida real estate market is the healthiest and most balanced in a decade. Real buyers and real sellers are back as we see the investor and distressed market fade,” said Mike Pappas, CEO and president of Keyes Company, covering the South Florida market. “Our affordability factor is still strong due to reasonable pricing and low interest rates. With our economy strengthening on all fronts our future looks bright.”

Metro areas with a population of at least 200,000 with the highest share of distressed sales were Flint, Michigan (26.0 percent), Tallahassee, Florida (24.2 percent), Memphis, Tennessee (24.1 percent), Pensacola, Florida (23.0 percent), and Ocala, Florida (21.7 percent).

“The market has shifted. In 2010, almost 30 percent of all listings in the Seattle area were distressed — either REO or subject to a short-sale — and today the figure about one-third of that. Although, still running at above historical averages, the decline in distressed sales is not surprising given that we continue to see a decline in these listings,” said Matthew Gardner, Chief Economist Windermere Real Estate, covering the Seattle market. “Moreover, when we look at the decline in institutional investors — as well as all cash buyers — this is a sign that Seattle home prices have escalated to a point that it is increasingly difficult for these buyers to see significant returns on their investments.”

Bank-owned sales

Bank-owned sales accounted for 3.9 percent of all residential property sales in May, down from 6.9 percent in the previous month and down from 9.0 percent a year ago to the lowest level since January 2011.

Metros with the highest share of REO sales were Flint, Michigan (16.0 percent), Mobile, Alabama (13.1 percent), Tallahassee, Florida (12.6 percent), Palm Bay-Melbourne-Titusville, Florida (11.9 percent), and Fayetteville, North Carolina (11.9 percent).

In-foreclosure sales

Properties that sold while in the foreclosure process — but not yet bank-owned — accounted for 6.6 percent of all residential property sales in May, down from 8.5 percent the previous month and down from 9.2 percent a year ago to the lowest level since January 2011.

Metros with the highest share of in-foreclosure sales were Chicago (14.8 percent), Rockford, Illinois (14.6 percent), Toledo, Ohio (13.4 percent), New Haven, Connecticut (12.7 percent), and Memphis, Tennessee (12.7 percent).

“While housing demand has remained high across much of Ohio, there are communities where we have noticed year-over-year decreases in foreclosure inventory, coupled with year-over-year decreases in institutional and cash sales, creating a slight decrease in pending sales and median prices for the month of May,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio.

Markets with highest share of cash sales and institutional investor sales

The top five metro areas with a population of at least 200,000 with the highest share of cash buyers were all in Florida: Naples-Marco Island (56.0 percent), Sarasota-Bradenton, (54.0 percent), Miami (53.4 percent), Ocala (49.9 percent), and Cape Coral-Fort Myers (49.7 percent).

“As expected the market is leveling after a great run.  All cash buyers, a typical harbinger of lofty markets, are down a few ticks signaling another metric drop of demand. Another leading indicator for us, institutional buying was down in May too,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market where cash buyers dropped to 22.8 percent in May.  “On the other side of the scale distressed homes as a percentage of total market continues to fall while the price percent below median sales price for distress sales increased.  All of these metrics point to a cooling market, trending toward what we believe is a more balanced and healthy market track.”

The top five metro areas with a population of at least 200,000 with the highest share of institutional investor purchases were Rockford, Illinois (13.4 percent), Tulsa, Oklahoma (12.6 percent), Roanoke, Virginia (12.6 percent), Memphis, Tennessee (10.2 percent), and San Antonio, Texas (8.4 percent).

Report methodology
The RealtyTrac U.S. Home Sales & Foreclosure Report provides median sales prices of distressed and non-distressed homes, along with percentages of distressed sales and all sales that are sold to investors, institutional investors and cash buyers, a 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, foreclosure filings and loan data. Statistics for previous quarters are revised when each new report is issued as more deed data becomes available for those previous months.

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 a calendar year.

Distressed sale: a sale of a property that occurs while the property is actively in some stage of foreclosure (NOD, LIS, NTS, NFS or REO). This includes only sales to third-party buyers or investors not involved in the foreclosure process. It does not include property transfers from the owner in default to the foreclosing bank or lender.

REO sale: a sale of a property that occurs while the property is actively bank owned (REO).

In-foreclosure sale: a sale of a property that occurs while the property is actively in default (NOD, LIS) or scheduled for foreclosure auction (NTS, NFS).

About RealtyTrac
RealtyTrac is a leading provider of comprehensive U.S. housing and property data, including nationwide parcel-level records for more than 130 million U.S. properties. Detailed data attributes include property characteristics, tax assessor data, sales and mortgage deed records, distressed data, including default, foreclosure and auctions status, and Automated Valuation Models (AVMs). Sourced from RealtyTrac subsidiary Homefacts.com, the company’s proprietary national neighborhood-level database includes more than 50 key local and neighborhood level dynamics for residential properties, providing unrivaled pre-diligence capabilities and a parcel risk database for portfolio analysis. RealtyTrac’s data is widely viewed as the industry standard and, as such, is relied upon by real estate professionals and service providers, marketers and financial institutions, as well as the Federal Reserve, U.S. Treasury Department, HUD, state housing and banking departments, investment funds and tens of millions of consumers.

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