Home purchases relying on cash and no mortgage financing climbed to a 10-month high of 30.1 percent of home sales in February, according to the latest results from the monthly Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.
Meanwhile, the use of FHA financing in home purchases in February fell to the lowest share ever recorded by the five-year-old HousingPulse survey: just 19.4 percent. A year ago, the FHA share of home purchase transactions stood at 25.3 percent.
The monthly HousingPulse survey results are based on a three-month moving average.
With a sharp drop in refinance activity triggered by rising interest rates, the mortgage industry this year is looking to the home purchase market for more mortgage business. And toward that end many lenders have started loosening – albeit guardedly – their mortgage underwriting requirements.
But this mortgage industry move to widen the credit box for home purchasers hasn’t yet produced any tangible increase in mortgage financing activity in early 2014. In fact, factors like competitive regional housing markets and higher FHA costs appear to be having a bigger impact on mortgage usage.
A closer look at the latest HousingPulse results indicates the rise in all cash purchases is being driven both by investors and current homeowners. In the case of investors, a small but steady rise in distressed property activity over the last three months has contributed to the increase in cash transactions.
The distressed property share of all home purchase transactions was 25.6 percent in February, according to the HousingPulse survey. This was the highest level posted in the past seven months and suggests more foreclosed properties are being put up for sale by banks. Investors are the largest group of purchasers of distressed properties.
The share of investor home purchases using cash hit 74.5 percent in February, up from 71.8 percent a month earlier and the highest cash usage level posted by investors in 10 months.
The use of cash also was up for current homeowners. HousingPulse data show the share of home purchase transactions by current homeowners involving cash climbed to 26.3 percent in February. That was up from 25.0 percent a month earlier and the highest level in almost a year.