Prices Keep Climbing, and More Homes Are Bought Cash Upfront
NEW YORK (TheStreet) -- There's no shortage of activity in the housing market, especially on key issues such as home prices and under-the-radar issues such as "all-cash" home purchases.
First up are home prices, which seem to have bounced around this year as the market grappled with mixed economic news but are on an undeniable steady climb.
CoreLogic reports that home prices have seen 25 straight months of year-to-year increases. It also reports that the average home price across the nation rose 11.1% in March on a year-to-year basis.
Compared with February, home prices rose by 1.4% in March, which mirrors year-to-year growth activity, but it's a number the market would prefer to be higher.
"March data on new and existing home sales was weaker than expected and is a cause for concern as we enter the spring buying season," says Dr. Mark Fleming, chief economist for CoreLogic. "Interest rate-disenfranchised potential sellers are adding to the existing shadow inventory, while buyers who can't find what they want to buy are on the sidelines creating a new kind of 'shadow demand.' This supply and demand imbalance continues to drive home prices higher, even though transaction volumes are lower than expected."
There are more purchases in which the full sales price is paid upfront, but sales of distressed properties (including short sales and foreclosures) are down, according to the National Association of Realtors.
That could mean speculators, who wade in and buy investment properties and try to flip them for a profit, could be taking a breather. "Distressed home sales, most popular with investors who pay cash, have declined notably in the past two years, yet the share of all-cash purchases has risen," says Lawrence Yun, the NAR's chief economist. "At the same time, investors have declined as a market share, indicating other changes have been underway in the marketplace."
Some U.S. regions are red hot in terms of all cash purchases. Florida, for example, saw cash purchases account for half of all sales volume during the first quarter of the year. Cash purchases in Nevada and Arizona accounted for 40% of all sales during the same period.
"These findings beg the question as to why we're seeing higher shares of cash purchases," Yun said. "The restrictive mortgage lending standards are a factor, but the higher levels of cash sales may also come from the aging of the baby boom generation, with more trade-down and retirement buyers paying cash with decades of equity accumulation."