All cash sales of homes, which accounted for one in three transactions just a year ago are slowly slipping as home shoppers searching for bargain priced properties run low on cash. The slip in cash sales sent closed transactions in May to account for just 28% of home sales, according to the National Association of Realtors.
The drop-off accounted for a one percent decline from April and a 7% drop since a year ago this summer. Investors account for the bulk of all cash sales, pulling funds from stocks, bonds and other financial investment vehicles. Investors purchased only 17% of existing homes in May, down from 20% in April, NAR said.
However, the Campbell Inside Mortgage Survey, which gathers information from 3,000 real estate agents across the U.S. monthly said investors accounted for 21.6% of sales during the month, down from 23% in April.
Hedge funds and other large distressed property investors making residential purchases are rare, except in coastal areas, including California and where housing appreciation has historically returned sooner than in many other regions of the U.S. Retirement funds, home equity lines of credit, and savings accounts are also fairly common for investors to get their funds from to make purchases.
The Campbell study also shows many investors are unable to obtain conventional mortgage financing. Seventy-four percent of investors bought properties using cash during the month of May.
Only 11% of investors purchasing homes during the month did so with a mortgage, the Campbell survey revealed. The chairman of the National Association of Home Builders, Barry Rutenberg called on Congressional leaders in Washington, D.C. to provide access to mortgages for “qualified borrowers” and investors wanting to make home purchases.
The group is urging Congress to support access to mortgage credit, support affordable down payments for home buyers, enact appraisal reforms and oversight to ensure that appraisals accurately reflect true market value and establish a strong housing finance system as a federal backstop to ensure home mortgages are made available.
“Young Americans need to have the ability to pay for college in order to prepare for the jobs of the future,” said Rutenberg. “Homeownership has historically generated a thriving middle class by creating wealth and helping families to cover higher education costs. Hard working American families and the economy will continue to struggle until we get housing back on track.”