Is the wave of cash that helped power the real estate recovery over the past 18 months beginning to recede?

A look at fresh data from The Warren Group, publisher of Banker & Tradesman, suggests it may be so.  

After peaking at almost 40 percent of all sales in October 2011, cash sales made up only 23.2 percent of home sales in June, the lowest they’ve been since June 2010, when first-time homebuyers were flooding the market to take advantage of the federal homebuyer’s tax credit. Those numbers are still up from historic norms: between 2000 and 2007, cash sales made up about 18 percent of the market. The percentage of cash sales varies with the season of the year, declining in the spring when traditional buyers are out in force and increasing in the winter months when professional investors remain active while many home-seekers are caught up in family obligations. But year over year, cash sales were also down significantly from June 2012, when they made up 31.3 percent of sales. 

The decline in cash purchases may be a sign of investors’ interest waning as distressed inventory is reabsorbed. Many of the Bay State cities hardest hit by the crash have been swarming with investors looking to snap up distressed properties for cheap as the market begins to recover. But Kevin Sears, co-broker/owner of Sears Real Estate in Springfield, says he’s definitely noticed a dip in cash purchases in recent months.

“We’re definitely seeing it quiet down. As the number of foreclosed properties coming on the market dwindles, we’re seeing fewer and fewer cash sales,” he said.

‘A Little Weird’

Still, though, he wouldn’t quite say the market had returned to normal. “The market’s been a little weird,” he said. “We’re definitely seeing some price increases, and I think that’s absolutely related to the fact that we don’t have as many bank-owned properties in the market. I think we’re on the right track.” Sears said he was also beginning to see buyers who had bought at or near the pre-crash peak return to the market ready to move up, another sign of stabilization.

But while Springfield may be returning to normal, some hotbeds of investor interest closer to Boston are still hopping. Justin Green, broker/owner of In Realty in Dorchester, said he’s been awash in multiple-bids for just about everything he’s listed this spring. With the exception of a slight pause for the Fourth of July, so far the frenzy looks set to continue all summer.

“It seems like there’s a lot of money floating around,” said Green. “Every single investment [property] that the numbers even remotely work, I could have five or six people wanting it. Maybe more. People are dying to invest in real estate, there’s just not a lot to be had.”

Indeed, if cash is still king anywhere it’s in the condo sector, which dominates Boston neighborhoods like Dorchester. Statewide, 30.4 percent of condo purchases in June (and 37.8 percent of condo purchases year-to-date) have been all-cash, according to The Warren Group data. Historically, cash purchases have made up about 20 percent of all condo purchases. Post-housing crash, that number spiked to over 50 percent in the fall of 2011 and again in December of 2012, before falling to 30 percent this spring.

But even in Green’s neck of the woods, investment buyers are more confident of obtaining financing now than a few years ago. He’s seen several cases where investors made all-cash offers in order to secure a property, but were able to obtain financing before closing. Even more frequent are investment purchases which use a mix of cash and financing.  

“We’ve had a number of individual condo units that were bought with 30 to 40 percent cash down. We’re also seeing people waive their mortgage contingency, because they’re willing to put 50 percent down or more, and confident they can get financing,” he said.

Competitive markets like Dorchester are still causing headaches for would-be homeowners, said Sam Schneiderman, president of the Massachusetts Association of Buyers Agents. A lot of Boston-area inventory “has been scooped up by investors,” he said. For now, he’s still seeing crazy bidding wars and all cash offers “in certain pockets. But after July 4, it did calm down a bit.” While he’s advising his current buyer clients to be wary of the real possibility of being outbid by a cash purchaser, he’s also confident that that threat will diminish in the coming months.

“The small investors, the ones picking up one to three properties, I think those guys are probably already played out, and we’re probably going to start to see a decline there,” he said.

Email: csullivan@thewarrengroup.