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Cash Sales Share Remains Elevated Despite Persistent Declines

bank-owned-five [1]The share of residential home sales that are all-cash transactions has been on the steady decline for nearly five years. At their peak, all-cash sales accounted for nearly half of all home sales; now that percentage is down below one-third, according to data released by CoreLogic on Monday [2].

Despite the persistent declines, the cash sales share remains elevated above pre-crisis levels more than seven years later. In September 2015, the cash sales share declined by another 3.4 percentage points year-over-year down to 32.5 percent, meaning all-cash transactions accounted for less than one-third of all residential home sales. At their peak in January 2011, all-cash transactions accounted for close to half of all homes sales at 46.6 percent. CoreLogic estimates that if the cash sales share continues to decline at the rate it did in September, it will reach pre-crisis levels by the middle of 2017.

About 58.3 percent of cash sales were REO properties in September, making it the category with the largest cash sales share. Even though the percentage of cash transactions that were REO remained high, REO properties accounted for a small percentage of cash transactions overall at 6.4 percent as sales of REO properties continued to decline. At their peak in January 2011, REO sales accounted for nearly one-quarter of all home sales at 23. 9 percent.

12-21 CoreLogic graph [3]"The cash share was 32 percent in September, far below the 47 percent peak in January 2011 but still above the long-term average of about 25 percent in more normal market conditions,” CoreLogic Chief Economist Frank Nothaft said. “Two factors that have moved the cash share lower are the drop in REO sales—often purchased by investors for cash—and the strong U.S. dollar, which has discouraged foreign buyers.”

The cash sales share remained near one-half in a handful of states in September. Alabama had the highest cash sales share for September with 48.2 percent, followed by West Virginia (46 percent), Florida (45.2 percent), New York (44.1 percent), and Kentucky (39.6 percent). The cash sales share was higher than 47 percent in five metro areas during September, four of which were located in Florida: Miami-Miami Beach-Kendall (50.8 percent), West Palm Beach-Boca Raton-Delray Beach (50.6 percent), Philadelphia, Pennsylvania (48.9 percent), Fort Lauderdale-Pompano Beach-Deerfield Beach (47.9 percent), and North Port-Sarasota-Bradenton (47.2 percent). Syracuse, New York (14.1 percent) had the lowest cash sales share in September.