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Cash Sales Share Drops to Nine-Year Low

jar-of-cash [1]All-cash transactions comprised nearly 31 percent of all single-family residential home sales nationwide in July 2015, marking a decline of more than three full percentage points year-over-year, according to CoreLogic [2] cash sales data released on Friday.

With July’s decline, the cash sales share has fallen year-over-year every month since January 2013, a total of 31 consecutive months, according to CoreLogic. July 2015’s reported share of 30.8 percent was a dropoff from the share of 34.2 percent reported in July 2014.

As has historically been the case, REO sales made up the largest portion of cash sales with 56 percent in July 2015, and resales had the second highest share at 30.2 percent (resales made up 83 percent of all home sales in July and therefore have the biggest impact on moving the overall cash sales share). Short sales comprised 28 percent of cash sales, followed by new homes at 15.6 percent. Despite REO sales making up more than half of all cash sales, REO’s share of total home sales remained low in July at 6.1 percent. In January 2011, when the cash sales share reached its peak, REO sales made up 23.9 percent of total home sales.

Previously, much of the cash sales share could be attributed to institutional investors buying distressed properties at discounts; the continued decline of the cash sales share is a likely indicator that fewer institutional investors are buying homes, and that more buyers are obtaining mortgage credit, according to CoreLogic Senior Economist Molly Boesel.

Four states had a cash sales shares higher than 40 percent in July, led by Alabama (47.4 percent), Florida (44.7 percent), New York (42.8 percent), West Virginia (41.1 percent) and New Jersey (39.5 percent). Out of the nation’s top 100 Core-Based Statistical Areas, the five with the highest cash sales share were all located in Florida: West Palm Beach (53.2 percent), Miami (52.2 percent), North Port-Sarasota-Bradenton (50.1 percent), Fort Lauderdale (48.4 percent), and Cape Coral-Fort Myers (47.9 percent). The metro area out of the top 100 with the lowest cash sales share was Washington-Arlington-Alexandria, D.C.-Virginia at 13.6 percent, according to CoreLogic.

At their peak in January 2011, cash sales comprised about 46.5 percent of total single-family residential home sales in the United States. The cash sales share typically averaged about 25 percent prior to the housing crisis; if the share continues to decline at the same rate it did in July 2015, CoreLogic estimates that it will fall to 25 percent by the middle of 2017.