In cities across the nation, cash-and-carry buyers are still gobbling up houses at foreclosure—and luxury—prices.
Here's the good news for the housing market: The forces driving up prices in metro areas all across the nation may be easing up ever so slightly. Here's the bad news: The middle class still can't afford to buy homes.
Almost 40 percent of all U.S. home sales in the second quarter of 2014 were all-cash purchases, according to the latest report from RealtyTrac.com. Just about 5 percent of home sales were purchased by institutional buyers—companies or entities that bought more than 10 properties over the course of a year. Both of these figures are down from the last quarter, and down still more so from 2012, when housing prices hit their nadir.
Although they're down slightly from Q1, these figures are still high enough to have a big impact on housing sales nationwide. For a handful of states, nearly half the home sales in Q2 were all-cash buys: Florida led the way (57.9 percent), followed by Michigan (49.7), New York (48.8), and Nevada (48.3). In Virginia, the state with one of the lowest figures, all-cash purchases still accounted for more than one-fifth of home sales (22.2 percent).
For many metro areas, big buyers are still driving home sales. Institutional investors bought up 15.6 percent of the homes sold in the Atlanta metro area in Q2, down just slightly from Q1 (16.5 percent). The Jacksonville, Knoxville, and Columbus, Ohio, metro areas saw big jumps in the share of house sales going to institutional investors.
In six metro areas—Las Vegas, Detroit, Kansas City, Philadelphia, Cleveland, and New York—almost half the new single-family and condo sales were all-cash sales. Which is incredible. Cash buyers are picking up homes at the high and low ends of the spectrum. They account for nearly half the luxury homes sold, but also well more than half of homes sold for under six figures.
A couple of findings leap out from the report. Cities in Florida are getting jacked by big housing buyers. The six metro areas with the highest share of all-cash sales nationwide are all in Florida: Miami (64.1 percent), Cape Coral (62.1), Sarasota (61.5), Tampa (54.6), Lakeland (53.0), and Orlando (52.2).
Another big trend: The people who are buying distressed homes are paying for them in cash. Almost half of bank-owned sales were cash purchases (49 percent). Home-owners who sold their homes during the foreclosure process in Q2 sold them to all-cash buyers most of the time (61 percent). Almost every home sold in an auction foreclosure was paid for in cash (96 percent).
For middle-class renters who might like to buy homes and can afford the mortgage payments (and that turns out to be many renters in many cities), the competition from corporate and wealthy buyers and investors is still too steep. Despite a dip from Q1 to Q2—and from 2012 to 2014—cash-and-carry buyers are still outperforming mortgage seekers.
Credit can't compete with cash, especially when so many would-be buyers are already paying off student-loan debt. As long as a big chunk of the housing market is reserved for big buyers, whole classes of renters will be priced out of the American Dream.