Thursday, February 07, 2013

Lawler on Housing: More Data on Cash Buyers

by Calculated Risk on 2/07/2013 05:43:00 PM

From economist Tom Lawler:

DataQuick reported yesterday that both the number and the share of California home sales purchased with cash (meaning no mortgage was recorded at the time of sale) hit record levels in 2012. According to DataQuick, 145,797 California condos and homes were bought without mortgage financing last year, representing a record high 32.4% of all home sales, up from 30.4% in 2011 and more than double the average “all-cash” share since 1991. Based on mailing addresses vs. property addresses, DataQuick said that “investors and vacation-home buyers” represented “roughly” 55% of all California homes purchased with cash last year. Dataquick also reported that in 2012 there were “more than” 11,700 buyers who bought more than one home for cash, and that these “multi-home, all-cash” buyers combined purchased “about” 41,450 homes, representing “about” 9.3% of total sales.

Various MLS data on sales by financing indicate that the “all-cash” share of home purchases increased significantly in a wide range of markets starting in the latter part of decade, and remained high last year. Here are a few areas where either (1) local MLS produce annual stats which include data on financing type; or (2) where I went back to monthly reports.

All-Cash Share of MLS Home Purchases (Yearly Totals)
PhoenixOrlandoTucsonMiami MSA: SFMiami MSA: C/THSacramentoDes MoinesOmaha
200711.6%9.0%12.6%  4.4%  
200812.6%20.3%18.8%  15.4% 12.1%
200937.2%41.4%23.9%  25.1% 11.8%
201041.8%51.5%28.3%  26.7%20.1%16.7%

All-Cash Share of MLS Home Purchases
DC Metro19.9%20.3%6.2%
Baltimore Metro23.4%22.5%9.0%
Florida SF47.2%  
Florida C/TH73.5%  
Las Vegas55.2%50.8% 

The surge in the all-cash share of home purchases in many areas reflects an increase in the investor share of total purchases, though there also appears to have been an increase in the all-cash share of owner-occupied purchases.

In the early-to-mid part of last decade the investor share of home purchases increased significantly in several areas, especially areas that experienced a sharp increase in home prices. However, back then, the bulk of investors buying homes used mortgage financing, often with as much leverage as allowable and often with loan features that many today would view as “risky.” In the early/mid part of last decade few investors bought homes because rental yields looked attractive, but instead the purchases were driven by expectations of price appreciation. When prices started to soften investor buying eased, many investors listed homes for sale at price levels above the new, lower “market-clearing” levels, home listings soared, mortgage defaults surged, and, well, ...

CR Note: This was from Tom Lawler.