RealtyTrac® released its Q2 2014 U.S. Institutional Investor & Cash Sales Report, showing all-cash sales accounted for 37.9% of all sales of single family homes and condos nationwide in the second quarter, down from a three-year high of 42.0% in the previous quarter but up from 35.7% in a year ago. The report also shows that sales to institutional investors — entities that purchase at least 10 properties in a calendar year — accounted for 4.7% of all sales of single family homes and condos in the second quarter, down from 5.3% in the previous quarter and down from 5.8% a year ago to the lowest level since the first quarter of 2012.
Cash sales account for larger share of very high-end, low-end and distressed sales
The report shows that U.S. cash sales hit a recent peak of 45.8% of all home sales in the first quarter of 2012, when home prices bottomed out, but were down to as low as 34.0% of all sales in the third quarter of 2013 before jumping to 36.6% in the fourth quarter on the heels of the rise in interest rates and jumping again to 42.0% of all sales in the first quarter of 2014, when new qualified mortgage rules from the Consumer Financial Protection Bureau took effect.
Cash sales in the second quarter were skewed higher on both ends of the home price spectrum. Cash sales accounted for 67% of purchases of homes selling for $100,000 or less, and cash sales accounted for 45% of purchases of homes selling for more than $2 million. Cash sales represented a larger share of distressed sales, with 49% of bank-owned sales, 61% of sales of properties in the foreclosure process, and 96% of sales at the foreclosure auction. By comparison, non-distressed home sales were 36% all-cash.
Cash sales more than half of all sales in Miami, New York, Detroit, Atlanta, Las Vegas
Among metropolitan statistical areas with a population of at least 500,000, those with the top six highest percentages of cash sales were all in Florida: Miami-Fort Lauderdale-Pompano Beach (64.1%), Cape Coral-Fort Myers (62.1%), Sarasota-Bradenton-Venice (61.5%), Tampa-St. Petersburg-Clearwater (54.6%), Lakeland (53.0%), and Orlando-Kissimmee (52.2%). All six metros posted a lower all-cash share of sales than the previous quarter and a year ago. Other major metro areas with an all-cash share among the top 20 highest nationwide were Las Vegas (50.7%), New York (48.2%), Detroit (47.7%), Kansas City (46.8%), Philadelphia (45.1%), and Cleveland (45.1%).
Institutional investor share increases in Las Vegas, Jacksonville, Columbus, Miami
Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of institutional investor purchases in the second quarter were Atlanta-Sandy Springs-Marietta (15.6%), Las Vegas-Paradise (14.4%), Jacksonville, Fla., (12. 5%), Memphis, Tenn. (12.0%), and Charlotte-Gastonia-Concord (11.3%). Although Atlanta documented the highest share of institutional investor sales in the second quarter, its 15.6% share was down from a 20.6% share in the first quarter and a 16.5% share in the second quarter of 2013 — following nine consecutive quarters with year-over-year increases in Atlanta’s institutional investor share. The institutional investor share of home purchases were also down from a year ago in Memphis and Charlotte, but increased from a year ago in Las Vegas and Jacksonville, bucking the national trend. Other metro areas among the top 10 for institutional investor share with increases from a year ago were Knoxville, Tenn., (10.0% compared to 6.9% a year ago); Columbus, Ohio (9.2% compared to 6.9% a year ago); and Miami (8.2% compared to 6.7% a year ago).
Institutional investor breakdown: price, foreclosure status, financing and bulk sales
The report shows that the second quarter share of institutional investor purchases was the lowest since the first quarter of 2012, when they represented 4.6% of all U.S. home sales. The peak in institutional investor share of all sales was 6.0% in the first quarter of 2013. In the second quarter institutional investors purchased homes at an average sale price of $147,017, while the average estimated full market value of the homes purchased was $164,553 at the time of the sale. The majority of purchases made by institutional investors in the second quarter were all-cash (79%) and not in any stage of foreclosure or bank-owned (80%). Of the remaining 20%, 7% were bank-owned, 11% were scheduled for a foreclosure auction, and 2% were in default with no foreclosure auction date set.