Cash sales are dying down in most sectors of the housing market – except among condominium purchasers, who are still using cash at elevated rates more than four years after the housing crash, a fresh look at data from The Warren Group, publisher of Banker & Tradesman, reveals.
After surging to over 50 percent of condo purchases and more than a fifth of single-family sales at their peak, cash purchases have fallen to levels closer to pre-housing crash norms in recent months among single- and multifamily purchasers.
So far this year, approximately 11.6 percent of single-family sales have been cash purchases. That’s above the levels of the boom years – between 2005 and 2007, less than 6 percent of single-family purchases were cash sales – but well below the housing crash highs reached in 2011, when a flood of distressed properties and investor purchasers resulted in more than 20 percent of single-family sales in the Bay State being made with cash. The story is similar among two- and three-family sales, always more popular with investors, for which cash purchases have dropped from housing-crash highs of about 29 percent in 2011 to less than 10 percent so far this year.
In the condo market, however, the story is different: While the proportion of cash sales is well below its 2011 peak – when more than half of condo purchases were made with cash – they remain elevated, with 30.6 percent of condo sales so far this year made with cash. That’s about double the rate prior to the crash: Between 2005 and 2007, 14.5 to 16 percent of Bay State condo sales were cash purchases.

A Baffling Amount Of Cash

It’s somewhat unclear what’s driving the change. While foreclosure petitions have risen in 2014 compared to last year’s lows, foreclosure sales made up less than 2.4 percent of all condo sales in the Bay State so far in 2014, according to The Warren Group’s data. That’s far from the peak of the post-crash market – in 2010, 13 percent of all condo sales were foreclosures.
Short sales have also diminished as a force in the market – the median condo sale price so far this year was $310,000, far above the post-crash low of $252,650 in 2009 and exceeding the previous peak of $280,000. That means that far fewer homeowners are underwater, and short sales, which are more likely to attract cash-bearing investor buyers, are often unnecessary.
On a national level, short sales made up just 4 percent of total sales in September, according to an estimate by real estate data and analytics provider CoreLogic, down from a peak of about 10 percent.
While underwriting standards remain tougher than they were during the boom, local lenders say they’ve seen little sign of condos being more difficult to underwrite than single-family homes.
Certainly part of the oomph for cash sales for condos seems to be being provided by the luxury end of the market, according to agents. With the stock market having risen so dramatically in the past several years, many well-heeled buyers are taking the opportunity to cash out and re-invest in real estate, either for themselves or for their children.

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“It’s baffling, how much hard cash is out there – I’m actually surprised,” said John Ford, co-broker/owner of Ford Realty in Boston’s Beacon Hill. “Half of it’s inheritance money – I call them the golden children, the parents are giving them money for the down payment.”
Foreign buyers, especially in Boston’s high-end luxury sector, are also having an impact – though one that’s hard to measure precisely. Investor buyers often pay in cash, but also often use LLCs or real estate trusts to make their purchases, making it tough to quantify what proportion of sales are to such investors.
But even outside the luxury markets, cash-based condo sales are widespread. So far in 2014, cash sales made up more than half the condo sales in three Massachusetts counties – vacation-home mecca Dukes, home of Martha’s Vineyard, but also Berkshire and Plymouth counties.n

Email: csullivan@thewarrengroup.com