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News Now

Market
All-cash home sales stack up
CHICAGO (5/12/14)--All-cash home purchases continue to consume more of the market, despite investor activity slowing in the first quarter, the National Association of Realtors (NAR) reported last week.

About one-third of existing homes sold in the U.S. in the first quarter were paid for entirely with cash, up from 31% for all of 2013 and 29% in 2012, according to The Wall Street Journal.

Cash-happy investors have preyed on distressed home-sales since prices plummeted following the housing collapse in 2008, but as inventories have thinned and home prices have rebounded in recent months, investors have started vacating the market. 

Now, analysts say, it appears that retirees looking to downsize are leveraging the equity in their homes to make purchases so as to forego the burdens of mortgages and financing.

And they're doing so at a high clip.

"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," said Lawrence Yun, NAR chief economist. "At the same time, investors have declined as a market share, indicating other changes have been under way in the marketplace."

Distressed home sales dropped to 15% of the total existing home sales pie in the first quarter, a 2% drop year-over-year and an 11% drop from the first quarter of 2012.

Meanwhile, the percentage of "trade-down" buyers rose by 29% last year, up from 25% in 2012 and 23% in 2011, according to the 2013 NAR Profile of Home Buyers and Sellers study.

No matter who is purchasing the homes, cash sales in general continue to climb.

All-cash purchases have always dominated housing markets in Florida, Arizona and Nevada, but even in states such as Minnesota and South Carolina, which both experienced a 6% increase in the first quarter, all-cash sales have become more common as well.

"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," Yun said.


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