Cash Home Sales Climb to More Than One-Third

By Mike Colpitts

All cash home purchases climbed to make up more than one in three sales in the final quarter of the year, according to the Campbell Inside stack of cash Mortgage Finance Housing Pulse survey. At the same time, foreclosures declined slightly.

The Campbell survey polls more than 2,500 active real estate agents monthly. Homeowners looking to downsize, increase the size of their home or relocate are increasingly making their purchases in cash, not just investors who compose roughly a third of residential transactions.

Lower home prices, and in many cases the lowest prices in more than a decade are enabling home buyers to make their purchases in cash. Some homeowners who have even been evicted from their homes after being foreclosed are also making their next home purchases in cash after saving for their purchases while living in their homes without making mortgage payments.

The volume of cash sales increased to 34.1% of sales through the end of 2012, climbing from 30.8% the previous quarter, the survey determined. If the use of cash continues at the current pace, nearly half of all home purchases will be made in cash by the end of the year.

single family home

“Both mortgage rates and certificate of deposit rates have been very low for some time now,” said Thomas Popik, research director for Campbell Surveys. “But when the Federal Reserve explicitly said that bank rates will remain low for several more years, I think a lot of affluent homebuyers just threw in the towel and decided to use all cash.”

Distressed property sales or foreclosures and bank assisted short sales represented nearly half or 46.8% of sales in January, according to the Campbell survey. It’s the 25 th month that troubled sales have been above 40%. RealtyTrac said 204,080 foreclosed homes were sold during the fourth quarter of the year. That brought total foreclosure sales in 2011 to 907,138, a slight 2% decline from 2010.

“We continued to see a shift toward pre-foreclosure sales, or short sales, and away from REO sales in the fourth quarter,” said RealtyTrac CEO Brandon Moore. “Nationally, pre-foreclosure sales increased 15% from a year ago while REO sales decreased 12%. Pre-foreclosure sales outnumbered REO sales in several bellwether markets, including Los Angeles, Miami and Phoenix, where REO sales had outnumbered pre-foreclosure sales a year ago.”