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TRID-Imposed Closing Delays Elevate Cash Sales Share

reoThe share of total home sales that were all-cash transactions has been on a steady decline since January 2011, when cash sales made up almost half of total residential home sales nationwide.

The cash sales share has declined year-over-year every month since January 2013; from that month until October 2015, the average year-over-year decline per month was 2.7 percentage points with a high of 5.1 percentage points and a low of 1.4. In November 2015, according to data released by CoreLogic on Friday, the cash sales share decreased over-the-year by only 0.7 percentage points, down to 36.4 percent from 37.1 percent in November 2014.

The closing delays caused by the implementation of TRID in October 2015 are primarily what caused the more moderate decline in cash sales share compared to the larger declines in recent months. CoreLogic senior economist Molly Boesel said on the company’s blog that she expects this to be temporary.

“The elevated cash share for November was most likely related to the new federal mortgage rules that took effect in October 2015 (TRID) as some mortgage deals were delayed while the industry adjusted to the new mortgage rules,” Boesel wrote. “These delays are not expected to carry forward in future months.”

Cash sales made up 46.6 percent of all residential home sales at their peak in January 2011.The pre-crisis “normal” for the cash sales share is 25 percent, according to CoreLogic.

2-26 CoreLogic Graph

In November 2015, REO had the largest cash sales share, with 63.7 percent. Resales were second with 35.7 percent, and short sales made up slightly more than a third (34.3) of cash sales, and newly constructed homes made up 16.7 percent of cash sales. REO accounted for only 8.7 percent of total home sales in November 2015, compared with nearly a quarter (23.9 percent) at their peak in January 2011. Resales typically have the biggest impact on cash sales, because they make up more than three-quarters (78 percent) of all home sales.

The state with highest cash sales share in November 2015 was Michigan with 53.4 percent, followed by Alabama (51.4 percent), Florida (50.2 percent), Kentucky (49.1 percent), and New York (47 percent). Out of the country’s top 100 core-based statistical areas (CBSAs) ranked by population, Detroit had the highest cash sales share at 61.5 percent, followed by four CBSAs in Florida: West Palm Beach (53.4 percent), Miami (52.5 percent), Fort Lauderdale (50.4 percent), and North Port-Sarasota-Bradenton (50.1 percent. The CBSA with the lowest cash sales share in November was Syracuse, New York, with 13.1 percent.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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