Dramatic Increase in All-Cash Home Sales

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The tighter mortgage requirements introduced in January 2014 led to a considerable decrease in the demand for home loans. At the same time, during the first quarter of 2014 the number of all-cash house sales reached a share of 43% of all sales. This is the largest share which these deals have reached since the beginning of the compiling of the statistics in 2011.

The increase in the share of all-cash home sales from the first quarter of 2013 to the first quarter of 2014 was some 24%. While in 2013, their share formed only 19% of all sales, in 2014, this share increased more than twice. The share of all-cash deals during the first quarter of 2014 was the highest in Cape Coral, Florida. It was 74%. Miami, Florida, followed with 67%. The third place was taken by another Florida city, Sarasota, with 65%. Other places with a large share of all-cash sales included Boston, New York and the small coastal towns of California.

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The growth in the all-cash house purchases is due primarily to increased individual investor activity. Institutional investors are withdrawing from the market after having made considerable profits from foreclosures during 2012 and 2013. Currently, more and more all-cash deals are made by people who want to own a second home and by those who want to invest in a rental property. The number of individual foreign investors has grown considerably as well.

The individual buyers also prefer markets with lots of foreclosures where the prices are traditionally lower. This explains why the foreclosure-stricken cities in Florida have got top places on the list for areas with the largest chunk of all-cash sales. This factor helps to explain that the average closing price on cash deals was 13% lower than the average estimated value of the purchased properties.

The number of all-cash home sales is not expected to increase any further.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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