By Mike Colpitts
Cash buyers are putting undue downward pressure on home prices, and sending the values on homes much lower than would otherwise be developing, according to a survey by Campbell Inside Mortgage Finance. The firms Housing Pulse Tracking Survey is taken monthly.
The December survey also showed that many of the purchasers are investors, who account for one out of three transactions or 33.2%. A huge 74% of investor purchases were all cash home purchases during the last month of the year, according to the survey.
The Campbell survey is taken monthly and polls more than 2,500 real estate agents doing business across the U.S., which has been taken since 2001.
The survey also found that cash buyers were able to make purchases at much lower prices on many homes as a result of shorter and more reliable closings. Banks and mortgage companies are more willing to take offers to purchase properties from cash buyers since they often do not usually require other contingencies, including mortgages and inspections.
The share of distressed properties in the housing market reached a high of 47.2% of inventory using a three month moving average, the survey found. The number of distressed properties, which includes foreclosures and bank assisted short sales, has been above 40% for the past two straight years.
Investors accounted for 22.8% of residential purchases during the month, up six-tenths of a percent from November. However, despite representing slightly less than a quarter of purchases investors’ have an over-sized command on the market since their ability to pay cash in the majority of transactions puts undue downward pressure on home prices.
Appraisal issues are also strongly contributing to housing market problems. Appraisals below the agreed upon selling price and denials on financing for many buyers are troubling the market. Investors are usually able to purchase homes in cash at 10% to 20% off the listed price ranging in value above $250,000.