What happened to all the cash buyers?

Near the end of 2015, surprisingly 1 out of 3 buyers paid all-cash to close on their real estate transactions, according to new data from CoreLogic. The share of all-cash transactions dropped to 33.9% in October year-over-year – way down from the 46.6% peak reached in January 2011.

The number of all-cash transactions dropped to 33.9% year-over-year in October. If you look at historically, cash sales tend to make up about 25% of the market. CoreLogic estimates that cash sales will return to that level by mid-2018 (roughly 2 years).

Sharp declines in Real Eestate Owned (REO) sales is the main reason cash sales are steadily dropping, CoreLogic notes. REO sales consisted of 7.3% of all residential home sales in October 2015, a third of the peak in January 2011 at 23.9%.

“Foreclosure completions have fallen substantially over the past few years across the nation,” says Frank Nothaft CoreLogic’s chief economist. “This has led to a drop in REO sales. Roughly one-half of REO homes are bought for all cash. Thus, the drop in REO has been an important reason for the national decline in the cash share of all sales.”

The following states continue to see cash sales remain higher than 40% in October 2015:

  • Alabama: 51.7%
  • Florida: 46.7%
  • New York: 46.3%
  • West Virginia: 44.4%
  • Indiana: 40.8%

Source: “What’s Driving Down the Cash Sales Share?” DSNews (Feb. 4, 2016)

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