Recently released sales data shows the extent to which buying trends have changed in a hot housing market affected availabilityand the seller’s profit increases.
All-cash home sales hit 8-year high in second quarter real estate data provider Attom, in its latest US home sales report. About 35.4% of all single-family homes and condos sold between April and June were cash purchases, the most since the first quarter of 2014. For comparison, transactions with cash in the first quarter of this year made up 34.6% of the volume, and a year ago – 31%.
“Cash buyers continue to account for a larger percentage of home sales than usual, perhaps in part because homeowners are selling properties in high-value states and using the proceeds to buy a cash home in lower-value areas cost,” said Rick Shargo, executive vice president of market intelligence at Attom.
“With mortgage rates nearly doubling over the past year and the cost of financing soaring, cash buyers will have an even stronger competitive advantage for the foreseeable future,” he said.
Among metropolitan markets with sufficient transaction data, Naples, Florida, led the U.S. in cash home purchases as a share of total sales in the second quarter at 57.2%, followed by Utica, New York, with 52.7%. Youngstown, Ohio with 52.6%, Atlanta with 51.3% and Salisbury, Maryland with 51%.
While cash purchases have picked up over the past few years, reduced demand, partly due to rate pressures, has had an impact on startups that have sprung up to help customers competing with all cash buyers. In the past few weeks, startups with such programs, including UpEquity, Orchard and FlyHomes, have announced layoffs.
A consequence of the rise in all-cash transactions has been a reduction in the supply of more affordable homes, leaving many first-time and low-income buyers, who typically receive support through government programs, out of the market.
The share of purchases by borrowers with loans insured by the Federal Housing Administration in the second quarter was the lowest market share since late 2007, according to Attom research. FHA borrowers accounted for just 6.7% of single-family purchases, or one in 15, down from 7.3% in the previous quarter and 7.9% last year.
“FHA borrowers — and borrowers with VA loans — are at a significant disadvantage in a housing market characterized by historically short sales cycles and near-record levels of cash buyers,” Sharga said.
But if houses stay on the market longer than some data suggest they are, it can level the playing field, Sharga said. “We could see the volume of homes purchased by FHA and VA borrowers rise to more normal levels.”
Even when housing prices started showing up signs of softening demand in the second quarter, sellers also saw the biggest increase in profitability in more than a decade, according to Attom’s report. This is partly due to consumer anxiety not enough to the house. The margin on median-priced properties across the country rose 55.5%, reversing direction from the first quarter of this year, when it fell for the first time since 2019 to 48.3%. The profit margin in the second quarter of last year was 42.9%.
Each year, Florida dominated the top of the list for yield growth among large markets of 1 million or more. Orlando sellers saw their margin increase from 36.4% to 67.6% based on median home price. Returns in Tampa increased from 47.4% to 76.3%, while returns for home sellers in Miami increased from 38.9% to 66.8% annually.
In addition, home prices in the second quarter reached or equaled all-time highs in 168 of the 183 regions covered in the report, including New York, Los Angeles and Chicago.
“While price growth may slow as higher mortgage rates reduce demand from potential home buyers, home sellers should continue to profit from the record $27 trillion in home equity in today’s market,” Sharga said.