Cash Buyers and Qualified Investors Prop Home Sales

The uptrend in existing-home sales continues, with January sales rising for the third consecutive month with a pace that is now above year-ago levels, according to the National Association of REALTORS®.

Lawrence Yun, NAR chief economist, said the improvement is good but could be better. “The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence,” Yun said. “The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity.”

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the median price is being dampened by unusual market factors. “Unprecedented levels of all-cash purchases, primarily of distressed homes sold at deep discounts, undoubtedly pulls the median price downward,” Phipps said. “Given the levels of inventory we see today, we believe that traditional homes in good condition have held their value.”

Distressed homes edged up to a 37 percent market share in January from 36 percent in December; it was 38 percent in January 2010.

All-cash sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010.  All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15 percent of the market. The average of all-cash deals was 20 percent in 2009, rising to 28 percent last year.

“Increases in all-cash transactions, the investor market share and distressed home sales all go hand-in-hand. With tight credit standards, it’s not surprising to see so much activity where cash is king and investors are taking advantage of conditions to purchase undervalued homes,” Yun said.

 

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Source: http://www.mortgagenewsdaily.com/02232011_existing_home_sales.asp

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