This summer, our country saw a decline in the purchase of homes through all cash home sales. In June 2014, all cash sales only made up a total of 33 percent of home sales in the country. This was the lowest we have seen since September 2008, which is what most people consider the unofficial start of the financial crisis. 33 percent is 3.3 percent lower than the 36.3 percent of all cash sales that we witnesses in June 2013. Additionally, it was 1.4 percent lower than the 34.4 percent all cash sales reportedly made in May 2014.
Due to the seasonal nature of the housing market, cash share sales comparisons are generally made on a year-to-year basis. However, these figures have continuously dropped throughout the months, starting as far back as January 2013.
Despite the recent drops in all cash share sales, they are still higher than the all cash sales we saw before the housing crisis hit, which, back then, was only around 25 percent. The nation’s peak of all cash sales took place in January 2011, when 46.2 percent of home sales were made in cash transactions.
Trend of All Cash Home Sales
Looking back at the trend of all cash sales, the numbers have varied quite significantly between 2000 and 2014. Real estate owned sales saw their peak in June, when all cash sales reached a high of 55.3 percent. Re-sales hit their peak at 32.5 percent, short sales peaked at 31.8 percent, and newly constructed sales topped out at 16.2 percent.
When reviewing these figures you must understand that even though real estate owned cash sales were extremely high, they only make up 7.2 percent of all sales made in the month of June and, therefore, do not greatly influence the overall cash sales share. This is compared to January 2011, when the total amount of real estate owned cash sales share reached its peak at 24 percent of total sales.
All Cash Sales by State
The trend of all cash sales varies per state and region. In June 2014, the state of Florida had the largest share of all cash sales, reaching the high percent of 50.9. This was closely followed by Alabama, which had a peak of 48.1 percent. Other states with a high percentage of all cash sales were New York at 44.6 percent, Kentucky at 40.1 percent, and, lastly, Nevada, which topped out at an even 40 percent.
What Does a Drop in All-Cash Sales mean for Homebuyers?
The drop in all cash sales is good news for the average homebuyer. With all cash sales reaching a new low competitive, bidding has been slightly reduced, leaving a greater inventory of homes on the market. This opens the market up to first time buyers, as well as other buyers that are looking to finance a new home. The downside is that many homes have been priced out of their range due to the increase in home prices over the past two to three years.