All Cash transactions on existing home sales accounted for 24% of sales in March. That number fell by 33% in comparison to March 2014 numbers. In general, smaller amounts of all cash deals suggest that investors are not as active and that the slack has been picked up by long-term homeowners.
The drop in all cash sales relates to the drop in investor activity. As distressed properties for sale have decreased and home prices have gone up, investors have been seeing thinner profit margins of late. Distressed sales took a 10% share of home sales in March, which was down from 14% in 2014. As an investor, it’s harder to get a screaming home deal when sellers are not backed into a financial corner and forced to sell.
Seventy percent of investor purchases in March were made in all cash.
Having lower all cash sales suggests that distressed property sales may also be going down. Sellers have seen improvement in their financial standing since 2008, but particularly of late. Most sellers’ finances now afford them the ability to sell their home when they want to, not when they have to—creating a more balanced housing market with less crazy deals.
Even as cash deals have gone down, the housing market continues to improve, suggesting that the market’s recovery is due in large part to increased activity among long term homebuyers. More people have been willing to get financing on a home, particularly with current low mortgage rates. Cash sales may be decreasing but their smaller market share may also be from traditional financed sales grabbing a larger share of the market in 2015.