RealtyTrac, one of the nation’s leading sources of comprehensive housing data, is reporting that all-cash home purchases are up as luxury home buyers are continuing to make major waves on the national, and local Southern California, real estate markets.
The data company released its findings on cash purchases and investor activities on May 8 in its Q1 2014 U.S. Institutional Investor and Cash Sales Report. The report indicated that all-cash home purchases comprised approximately 42.7 percent of all U.S. residential property sales in the first quarter of 2014.
This is up from 37.8 percent from the fourth quarter of 2014. A year-over-year analysis shows that 2014 is already ahead of 2013, when the first quarter reported that 19.1 percent of all home purchases were paid in cash only.
This is the highest peak that all-cash home purchases have reached since RealtyTrac began tracking this data in the first quarter of 2011.
Luxury Markets Reaping the Benefits of Cash
Since the housing bubble burst in 2008, foreclosures and homes in distress made up most cash purchases as investors could afford to snatch up these properties easily, even in bulk. This study marks a significant change in the housing market as homes in foreclosure and bank-owned properties only made up 10 and 15 percent of all-cash purchases, respectively.
Picking up the slack seems to be high-end purchases made by investors and second-home buyers. According to the study, 52 percent of all-cash purchases in March were sold to buyers with mailing addresses that differed from the property address, indicating a second-home buyer or investor.
“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. “The good news is that as institutional investors pull back their purchasing in many markets across the country, there is still strong demand from other cash buyers- including individual investors, second-home buyers and even owner-occupant buyers- to fill the vacuum of demand left by institutional investors.”
Southern California is seeing an especially interesting trend as institutional investor purchases fell significantly this year as foreign investors continue to take a strong interest in the local market, a factor that is certainly doing its part to spur all-cash home purchases.
“Institutional investors have bought up much of the affordable inventory they are traditionally interested in, which explains the decrease in in institutional investor sales,” said Chris Pollinger, a Southern California real estate agent. “We are seeing a rise in foreign buyers purchasing high-end homes, which is contributing to the rise in all-cash purchases.
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(all data current as of 10/22/2017)
Listing information deemed reliable but not guaranteed. Read full disclaimer.