As large institutional investors slow purchases of investment homes, the market has seen a decline in cash purchases, reaching a four-year low in May 2014 according to CoreLogic. Although cash home sales remain stronger than before the housing crisis, the portion of cash sales in May 2014, 34.4 percent, is the lowest it has been since May 2010.
Cash sales before the housing crisis made up 25 percent of all home sales, based on the report by CoreLogic. In the past two years, cash sales have skyrocketed to 40 percent of all home sales on average. Of this number, around 5 percent of cash sales was from large, institutional investors, according to RealtyTrac.
In this year alone, cash sales have declined, going from first quarter 2014 numbers of 42 percent to second quarter sales at 37.9 percent, as reported by RealtyTrac. It appears that investing companies that own more than 10 houses have slowed their purchasing.
Of course these numbers vary widely from state to state, with Florida showing the highest percentage of cash sales at 53.4 percent and claiming the top six metro areas for cash sales as well: Miami; Cape Canaveral; Sarasota; Tampa; Lakeland and Orlando.
With limited availability on foreclosures and homes under $100K, it’s possible that smaller investors may also be expanding their strategies, funding sources and geographic reach.
This is consistent with findings from the VFS survey released in June 2014, which found that although cash remains the top choice for investors, private financing also plays a large role in fulfilling investor strategies.
The survey found that the more properties an investor owns, the more likely they were to use financing and other alternatives to cash. Also, flippers use private finance sources more often than investors favoring buy-and-hold strategies. For more information on VFS loans for investors, click here.