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CASH BUYERS RETREAT, MARKET CONDITIONS REMAIN
RIPE FOR TRADITIONAL AND FIRST-TIME BUYERS
If it wasn't for cash sales during the housing
downturn, sales today would look much weaker,
and the dramatic price declines over the past few
years would have been even steeper, according to
a recent report from CoreLogic.
From 2000 to 2005, cash sales remained
steady, representing around 25 percent of all
residential sales. When the real estate market
crashed in 2007 and 2008, the share of cash
sales—driven
by the rise in
REOs—jumped and
eventually peaked
above 40 percent two
years ago.
While cash sales
still remain elevated,
they are past their
prime point and are
slowly fading.
For 19 straight
months now, cash sales
have declined gradually
on a year-over-year basis.
According to the
data provider, cash
sales represented 39 percent of sales in May 2013,
down from 40 percent a year earlier.
Cash sales have also provided a major boost
to prices in certain markets. Overall, CoreLogic
stated, median prices for cash sales increased 24
percent year-over-year compared to a 15 percent
increase for all sales.
CoreLogic also examined cash sale trends
among the 10 largest markets.
According to the company's report, the idea
that hardest-hit markets have the largest share
or increase in cash sales is a myth. For example,
New York actually had the highest cash sales
share at 53 percent, though hard-hit markets
such as Riverside, California, and Phoenix also
held high shares that exceeded 40 percent.
Interestingly, in some markets, investor
activity has shifted from REO and short sales
to non-distressed sales, leading to a surge in
prices for non-distressed cash resales, CoreLogic
explained.
In April, prices for non-distressed cash sales
increased the most year-over-year in Atlanta
(+46 percent), Phoenix (+34 percent), and
Riverside (+28 percent).
As cash sales wane with investor activity,
CoreLogic pointed to the need for traditional
and first-time buyers to play a bigger role in
housing to help the recovery move forward.
Market conditions should support such
a shift. "Rising rates and home prices will
not dissuade the more traditional buyer from
entering the market and financing a home
purchase" since home affordability remains high
and supply is increasing, CoreLogic stated.
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