Cash sales soared in November and investors gained market share?but not enough to account for the record percentage of cash purchases dominating markets nationwide. Only one thing can explain the cash explosion: move up buyers are back.
All-cash purchases accounted for 42.0 percent of all residential property sales in November, up from 38.8 percent in October and up from a year ago to the highest level since RealtyTrac began tracking all-cash purchases in January 2011, according to RealtyTracâ€™s U.S. Residential Sales Report for November. However, home sales have declined with the coming of cold weather; they are 1.2 percent below the 4.96 million-unit pace in November 2012, according to NAR. This is the first time in 29 months that sales were below year-ago levels. Fewer sales mean market share percentages represent slices of a smaller pie compared to the summer and spring months.
The number of homes purchased with a mortgage fell 40 percent from October to November, to 135,154 - the lowest monthly total of financed home sales in the three years RealtyTracâ€™s been keeping the data. The raw number of all-cash deals in November was also down 31.2 percent from October, to 98,030.
The number of homes purchased with a loan has dropped steadily each month since May, when rates began to ratchet up. Mortgaged home sales totaled 360,227 in May, shrinking in June (338,650), July (317,002), August (288,094), September (250,026), October (225,076) and November (135,154).
“The housing market recovery continued to be driven by investors and other cash purchasers in November,” said Daren Blomquist, vice president at RealtyTrac.
The latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey reports the investor market share rose to 18.8 percent share of all home purchase transactions, a three-year high and an increase from the two-and-a-half year low of 16.6 percent registered in August.
Thereâ€™s no doubt that the investor share is growing this fall as owner-occupant buyers shut down for the season. A number of sources have reported an uptick in investor Hedge funds have continued to buy and distress sales in judicial state markets like Florida Michigan and Ohio present opportunity.
Though all-cash sales have in recent years become synonymous with investors there is very good reason to believe that investors alone donâ€™t account for the all cash sales boomlet: their ranks may also include large numbers of move up buyers. NAR reported all-cash sales comprised 32 percent of transactions in November, yet individual investors only purchased only19 percent of homes that month, unchanged from October and from November 2012. Institutional investorâ€™s purchases represented 7.7 percent of all residential property sales in November, up from 7.1 percent in October and up from 6.3 percent a year ago, according the RealtyTrac. That leaves about 6 percent of all-cash purchases coming from other buyers
Those could be the 15 percent of move up buyers pay all cash, according to recent NAR data, and the number may be growing as rising prices bolster the equity move up buyers have in the homes that he are selling. Many are retiring baby boomers who are downsizing and use the equity to pay all cash for a smaller home.
The Campbell HousingPulse data showed reported that move up buyers accounted for more half of all homes purchased. Current homeowners had a 52.3 percent share of the non-distressed housing market and first-time homebuyers had a 34.5 percent share in November.
In a September report on the foreclosure market, mortgage technology company FNC reported that increases in home prices projected to continue over the next few years-even though not at the current rates we are currently seeing-has stimulated housing turnover by prospective repeat buyers who can now take advantage of still somewhat low valued properties.
“Weâ€™ve seen hard data from the past 18 months that shows rising home prices and a foreclosure market with diminished impact due to decreasing foreclosure inventories and fewer new foreclosure filings,” said Yanling Mayer, director of research at FNC. “Meanwhile, a very encouraging trend that has been developing is the rising participation of trade-up buyers who are seeing improving home equity position and positive capital appreciation on existing homes.”
Mayer added that these types of trade-up buyers are typically “more responsive to market conditions and financial incentives.” Increases in home prices that are projected to continue over the next few years-even though not at the current rates we are currently seeing-has stimulated housing turnover by prospective buyers who can now take advantage of still somewhat low valued properties, FNC said.