Why Are Cash Sales Declining?

Cash sales accounted for 30 percent of total home sales in May 2016, down 2.5 percentage points year over year from May 2015, with resales having the biggest impact on total cash sale shares, according a recent report from CoreLogic.

The report shows that on a month-over-month basis, the cash sales share fell by 1.7 percentage points in May 2016. This was compared with April 2016. Additionally, for the first five months of 2016, the cash sales share averaged 33 percent. This was the lowest start to any year since 2008, compared to the cash sales share peak in January 2011 when cash transactions accounted for 46.6 percent of total home sales nationally and prior to the housing crisis, when the cash sales share of total home sales averaged approximately 25 percent.  CoreLogic states that if the cash sales share continues to decrease at the same rate that was seen in May 2016, this share will reach 25 percent by mid-2018.

It was also noted in the report that real estate-owned (REO) sales had the largest cash sales share in May 2016 sitting at 56.6 percent. Resales had the second highest cash sales share with 29.8 percent. Following resales was short sales with 27.9 percent and then newly constructed homes with 14.6 percent.

CoreLogic says that while the percentage of REO sales within the all-cash category remained high, REO transactions accounted for only 5.1 percent of all home sales in May 2016. They do say that resales typically make up the majority of home sales, though, totaling about 83 percent in May 2016, and therefore have the biggest impact on the total cash sales share. With existing home sales down 3.2 percent according to the National Association of Realtors this could attribute to the decline in cash sales.

In a further breakdown of the cash sales data geographically, the report shows Alabama as having the largest cash sales share of any state at 45.2 percent. This is followed by New York at 45.1 percent, and then Florida at 42.4 percent. New Jersey follows that lineup at 36.4 percent and Indiana rounds out the top five at 36 percent.

CoreLogic also provides a breakdown of the nation's Core Based Statistical Areas (CBSAs) measured by population. They found that Detroit-Dearborn-Livonia, MI had the highest cash sales share at 53.4 percent, followed by West Palm Beach-Boca Raton-Delray Beach, FL at 52.3 percent, Philadelphia, PA at 52 percent, North Port-Sarasota-Bradenton, FL at 50.3 percent, and Cape Coral-Fort Myers, FL at 49.3 percent. The report also shows Syracuse, NY as having the lowest cash sales share at 13.7 percent.