Despite rising home prices, many first-time buyers and investors continue to scoop up properties while mortgage rates remain low, providing high affordability. At the recent Realtors Conference and Expo in Orlando, Florida, representatives from the National Association of Realtors held a session called Changing Dynamics of Recent Home Buyers and Sellers, revealing a significant increase in cash purchases throughout the year.
"We've seen a tremendous increase in cash buyers since the housing downturn that we haven't seen before in history," said Lawrence Yun, chief economist of NAR.
When looking back to cash sales a decade ago, these transactions only made up 10 percent of purchases. However, they have accounted for more than 30 percent of all purchases since 2008, according to data from the agency.
While many factors have likely contributed to the rise in popularity of cash sales, stricter lending standards may be a main culprit, as even well-qualified applicants have been denied by lenders. Many economists and real estate professionals, as well as organizations such as NAR, are pushing for improvements for potential buyers, remaining hopeful that tight standards set at the start of the housing market slump will soon loosen.
Investors purchasing homes also often make cash offers, as they are typically more appealing to sellers, even if they are lower than their initial asking price. International buyers have also snatched up quite a few properties via cash payments, especially in cities such as Miami. According to data from NAR, 62 percent of international transactions were cash, a figure which has been on the rise since 2007.
Those who are second-time buyers are also reportedly paying with cash more, as 40 percent of repeat buyers use this to make a down payment on their future investment. As many more are upgrading to larger, or higher-priced homes, the cash profit received from their home sale doesn't necessarily cover the entire next purchase, notes NAR.
"Research shows a bias toward cash sales for newer and lower priced homes," Dr. Grant Ian Thrall, president of the American Real Estate Society, said at the event. "Many of those sales are occurring within the first 60 days that the home is on the market, and more than half sold within the first 120 days."
In recent months, reports of lower applications have been credited to a low inventory, however, cash sales may also add to this, while home sales could continue to rise with cash transactions becoming more popular.