The share of all-cash sales reached a new high in the first quarter of 2014, even as the total share of institutional investor purchases dropped to near-record lows. All-cash sales made up 42.7 percent of all U.S. residential property sales for Q1, up from 37.8 percent from the previous quarter, according to RealtyTrac’s U.S. Institutional Investor and Cash Sales Report.
All-cash sales increased yearly as well, up from 19.1 percent of all sales in Q1 2013. All-cash sales are the highest they have been since RealtyTrac began tracking this data in 2011.
"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, VP 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."
15 percent of all-cash purchases were for foreclosures, with 10 percent for REO properties. The average sales price of an all-cash purchase, $207,668, was 13 percent below the average estimated full market value of $237,900.
While all-cash purchases were soaring to new heights to start the year, total investor purchases dropped to the lowest level seen since Q1 2012.
5.6 percent of all U.S. residential sales in Q1 2014 were from institutional investors, which RealtyTrac notates as a non-lending entity that purchases at least 10 properties in the past 12 months.
Q1's figure was a step down from the 6.8 percent rate in Q4 2013, and down from 7.0 percent in Q1 2013.
"While the institutional investor purchase share declined in the first quarter in 18 of the top 20 markets for institutional investor share a year ago, home prices continued to appreciate in most of those markets, albeit at a slower pace in many cases," Blomquist added.
In total, 84 percent of investor purchases were all-cash in the first quarter, and slightly older homes fared better than newer homes in the eyes of investors. 35 percent of homes purchased by investors were built in the year 2000 or later and 50 percent built from 1990 or later.
30 percent of investor purchases were foreclosures, and 15 percent were REO. The average sales price was $128,747, which represents 18 percent below the average "after repairs" market value of homes.
Among metropolitan statistical areas with a population of at least 500,000, those with the top five highest percentages of cash sales were all in Florida: Cape Coral-Fort Myers (73.6 percent), Miami (67.1 percent), Sarasota (65.1 percent), Palm Bay (64.1 percent), and Lakeland, (61.8 percent).
Among metropolitan statistical areas with a population of at least 500,000, those with the biggest annual increase in share of institutional investor purchases were Baton Rouge, Louisiana (up 131 percent); San Francisco, California (up 92 percent); McAllen, Texas (up 62 percent); Allentown, Pennsylvania (up 49 percent); and Omaha, Nebraska (up 49 percent).