Cash-only Home Sales Still King in Florida, But Declining
By Housing Industry Forum Staff | August 16, 2016
Although all-cash sales of homes aren’t as prevalent now as they were during the housing crisis, they still account for one-third of all home sales, according to CoreLogic.
Yuliya “Julie” Sidorevskaya, a real estate broker in Miami, says there are still plenty of prospective buyers with cash. But there’s a lack of available homes for them to buy.
“They're all just sitting on the sidelines. They have cash sitting there, but I can't get them inventory,” Sidorevskaya says.
For the first three months of this year, the cash sales share averaged 34.7 percent, the lowest start of the year since 2008, according to the report, released by CoreLogic on June 23.
Cash sales peaked in January 2011, when those transactions accounted for 46.6 percent of total home sales nationally, according to CoreLogic. In March 2016, cash sales accounted for 33 percent of total home sales, down 2.4 percentage points year-over-year. Before the housing crisis, cash sales averaged about 25 percent of national home sales, CoreLogic says.
Of all-cash transactions in March, real-estate-owned (REO) properties were the largest sale type at 57.2 percent, followed by resales at 32.9 percent, short sales at 30.6 percent, and newly constructed homes at 14.4 percent.
However, REO sales accounted for only 6.8 percent of total national sales in March. That figure was 23.9 percent in 2011, when the percentage of overall cash sales was at its peak. Typically, resales account for the majority of home sales, so they have the biggest impact on the total cash sales share, CoreLogic says. In March, resales accounted for about 80 percent of transactions.
Where Cash Is King
Of the nation’s 100 largest metropolitan areas by population, Philadelphia had the highest cash sales share, at 55.7 percent in March, according to CoreLogic.
Real estate experts can’t point to one factor driving more cash transactions in that city than in other distressed housing markets, according to local news site Philly Voice.
The other metropolitan areas in CoreLogic’s “top five” areas for cash sales are all in Florida: the West Palm Beach area, including Boca Raton and Delray Beach (54.4 percent); Cape Coral and Fort Myers (52.6 percent); the region that includes North Port, Sarasota, and Bradenton (51.6 percent); and Miami, Miami Beach, and Kendall (51.4 percent).
“There has always been an influx of cash everywhere, including from international buyers and retirees,” Sidorevskaya says about the markets in Florida.
Cash homebuyers often have a competitive edge over other buyers, and they can typically pay lower prices than leveraged purchasers. But that doesn’t mean buying a home is the best investment for everyone with piles of cash.
“Typically, wrapping up a lot of cash in real estate – which is relatively illiquid and has high transaction costs – has been a deterrent for investors at higher price points,” says Steve Hovland, director of research for online real estate investment management firm HomeUnion.
Now that the return this year on stocks, commodities, and bonds may be more turbulent, there’s been a fundamental shift in acceptable prices that cash-wielding investors are willing to pay for properties, Hovland says.
The median price for all-cash investment home sales surged to $181,000 in April, a 19.3 percent jump year-over-year, according to HomeUnion’s data of investment homes and owner-occupied houses in 31 ZIP codes in the U.S.
Meanwhile the median price of leveraged-investment home sales increased 4.3 percent in April year-over-year to $233,200, says HomeUnion.
Sidorevskaya’s business, Julie’s Realty, has focused on real-estate-owned sales. (It has been a Fannie Mae broker since 2011.) When home prices were lower and inventory was larger, many cash buyers were looking for investment properties.
Sidorevskaya says she still fields about five phone calls a day from small-time investors and hedge funds looking for properties in the $500,000 range. She says their goals include flipping homes to buyers who want to fix them up and rent them out.
Miami has always been a “very hot” market, she says, with its mix of cultures, climate, and ocean views. But in Miami, like many areas of the country, the demand for housing exceeds the supply.
In general, economists say, in “normal” times there should be about a six-month supply of homes for sale. But the most recent data from the National Association of Realtors® show there was a 4.6-month existing-home sales inventory at the end of June at the current sales pace.
Until builders construct more homes and more properties are put up for sale, many cash buyers in Miami may wait for inventory or look into other real estate markets.
“Buyers have no choice but to go after whatever is on the market. Right now, they don't have a choice because there's not much to choose from,” Sidorevskaya says.
This article first appeared in The Home Story, which is also published by Fannie Mae.