REO Decline Drives Cash Sales Share Lower

The percentage of residential real estate homes sold in March 2016 that were all-cash transactions was down to about one-third (33 percent), which is a year-over-year decline of 2.4 percentage points, according to data released by CoreLogic on Thursday.

The ongoing steady decline in foreclosures since reaching their peak in 2010 has precipitated a corresponding decline in the nationwide cash sales share, according to CoreLogic. The cash sales share peaked in January 2011, when nearly half (46.6 percent) of all residential home sales were all cash.

“Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25 percent,” CoreLogic senior economist Molly Boesel said. “If the cash sales share continues to fall at the same rate it did in March 2016, the share should hit 25 percent by mid-2018.”

REO sales had the largest share of cash sales for March with about 57.2 percent, CoreLogic reported. Resales accounted for about 32.9 percent of sales, short sales made up about 30.6 percent of cash sales, and new home sales made up about 14.4 percent.

“Roughly one-half of REO homes are bought for all cash,” CoreLogic chief economist Frank Nothaft said. “Thus, the drop in REO has been an important reason for the national decline in the cash share of all sales.”

While more than 57 percent of all cash sales were of the REO variety in March, REO sales accounted for only 6.8 percent of all home sales—less than a third of their peak of 23.9 percent from January 2011. Resales have the largest share of all home sales, about 80 percent, and therefore have the most influence on how the cash sales share moves.

While cash sales comprising only a third of all residential home sales in March, the cash sales share remained elevated in some states. In Alabama, the cash sales share in March was near one-half (49.8 percent, followed by New York (47.5 percent), Florida (45.9 percent), Michigan (41.8 percent), and Indiana (41 percent). Of the 100 largest core-based statistical areas (CBSAs), the one with the highest cash sales share in March was Philadelphia with 55.7 percent, followed by four Florida CBSAs (West Palm Beach at 54.4 percent, Cape Coral-Fort Myers at 52.6 percent, North Port-Sarasota at 51.6 percent, and Miami at 51.4 percent.