Despite declines in distressed sales and investor activity, all-cash purchases are making up a larger share of the real estate market, according to a new report from the National Association of Realtors (NAR).
Lawrence Yun, NAR chief economist, said the findings are counterintuitive.
"Distressed home sales, most popular with investors who pay cash, have declined notably in the past two years, yet the share of all-cash purchases has risen," he said in a statement. "At the same time, investors have declined as a market share, indicating other changes have been underway in the marketplace."
Distressed home sales declined from 26 percent of the national market in 2012 to 17 percent in 2013 and 15 percent in the first quarter of this year; NAR projects distressed homes to drop to a single-digit market share by the fourth quarter. All-cash purchases rose to 31 percent in 2013 and 33 percent in the first quarter of 2014 from 29 percent in 2012.
In Florida, more than half of all homes were purchased with cash. High levels of all-cash sales also were recorded in Nevada, Arizona and West Virginia, accounting for close to four out of 10 transactions.
The findings, derived from a survey of about 3,000 responses each month for NAR’s Realtors Confidence Index, also show investors edged down from 20 percent of buyers in 2012 to 19 percent in both 2013 and the first quarter of this year.
A separate annual study of consumers, NAR’s 2014 Investment and Vacation Home Buyers Survey, shows investors at a somewhat higher market share, but declining more sharply from 24 percent in 2012 to 20 percent in 2013.
Yun seemed stumped by the contradictory indicators.
"The restrictive mortgage lending standards are a factor, but the higher levels of cash sales may also come from the aging of the baby boom generation, with more trade-down and retirement buyers paying cash with decades of equity accumulation," he said in a statement. "A majority of foreign buyers pay cash as well, and the five-year bull run of the stock market has also provided financial wherewithal among higher wealth households."
