All-Cash Home Sales Poised to Return to 'Historical Norms'

All-Cash Home Sales Poised to Return to 'Historical Norms'A big factor that has shaped home sales over the past two years has been all-cash transactions, reducing inventories and pushing prices higher.
But that trend is set to return to normal levels as discounts on distressed properties diminish and interest rates stay in a range above their all-time lows.
Real estate analytics firm CoreLogic analyzed the housing market in its just-released September update.
“As we move forward, we expect cash purchase activity to return to historical norms with an increased demand for mortgage financing,” CoreLogic said.
All-cash purchases nationwide accounted for 40 percent of all sales of residential property in July, up from 35 percent of all sales in June and up from 31 percent of all sales in July 2012, according to the latest numbers on such transactions by RealtyTrac.
In some states hit hard by the foreclosure crisis, deep-pocketed investors are dominant. Cash sales made up 66 percent of all sales in Florida in July. A year ago, that figure was at 57 percent of Florida’s home sales.
Only Nevada (64 percent) and Maine (60 percent) came close to Florida’s cash-only level.
The anticipated tapering of the Federal Reserve’s bond purchasing program toward the end of this year “portends additional interest rate hikes ahead,” CoreLogic said. The Fed this week kept its stimulus program intact, surprising the financial markets. But a slow tapering is still anticipated by year’s end.
CoreLogic sees the home purchase market strengthening as the refinancing boom of the past two years comes to an end.
A market driven by value — instead of primarily interest rates — will be healthy for the mortgage industry down the road.
“As purchase volumes continue to slowly rebound, we expect to see a flight to quality because borrowers value service and an end-to-end loan origination experience that is as smooth as possible,” CoreLogic said.
As of July 2013, about 949,000 homes nationwide were in foreclosure, compared to 1.4 million in July 2012, a year-over-year decrease of 32 percent.
The foreclosure inventory fell 4.4 percent just from June to July.
Foreclosed homes accounted for 12.2 percent of total home sales in the second quarter of 2013, a share that’s close to pre-crisis levels six years ago. That’s down from 17.3 percent a year ago, according to the latest report from real estate data firm FNC.
Foreclosure sales held a whopping 37 percent share of the market at the peak of the housing crisis in 2009.

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