Housing Slowly Heads Towards Normal: RealtyTrac's Blomquist

NEW YORK (TheStreet) -- The share of cash sales and institutional investor purchases of residential homes declined slightly from a year ago in June, signaling an ever-so-tiny reversal in a trend that has dominated the real estate recovery.

According to the U.S. Residential Sales report from RealtyTrac, all-cash purchases accounted for 30% of sales in June, down from 31% of all sales in the previous month and a year ago.

Purchases by institutional investors -- non-lending entities that purchased at least 10 properties in the last 12 months -- accounted for 9% of all sales in June, up from 8% in May, but down from 10% a year earlier.

Cash sales have dominated home sales activity in recent years, amid heightened interest from real estate investors.

Traditional first-time homebuyers and existing homebuyers have been largely absent. Many first-time homebuyers have been unable to access mortgage credit despite lower interest rates, while many existing homebuyers have lacked the equity in their homes that would allow them to "trade up."

As a result, most sales in the early part of the recovery were made to those who paid all cash, usually investors. The entry of institutional investors more recently has also kept the level of cash sales unusually high.

Cash sales helped the market recover from the bottom. But more recently, though, it is showing signs of peaking.

The number of distressed properties available for sale has dropped, prices are notably higher and interest rates are rising -- all factors that have made real estate a little less attractive for investors and cash buyers.

The decline in the share of cash sales may be an early sign that the market is stabilizing, according to Daren Blomquist, vice president at RealtyTrac.

"The U.S. housing market is slowly but surely moving toward a more normalized and sustainable pattern after a flurry of institutional and cash buyers flocked to residential real estate last year, pushing up prices and picking clean the best inventory available in many areas," said Blomquist in a press release. "Rising home values should continue to unlock more non-distressed inventory while also pricing institutional investors out of more markets, which, combined with rising interest rates, will cool off the pace of price appreciation."