Cash sales in us head back to normality

Photo credit: Michael Patrick

Cash sales of US property are gradually heading back to normal levels.

Before the housing crisis, cash sales accounted for an average of 25 per cent of US home sales. Since the crisis, though, cash sales increased, peaking in January 2011 when they made up 46.5 per cent of total home sales nationally.

Cash transactions are usually favoured by foreign buyers, so are a useful indicator of the volume of investment from overseas in the US market. Indeed, Florida and Miami have both traditionally been popular among foreign buyers, with cash accounting for twice as big a share of sales in the Sunshine State, according to realtors.

As the American economy continues to recover, and the housing market gradually returns to normality, though, investment from foreign buyers has begun to decrease, with domestic buyers slowly stepping up their activity.

On a month-over-month basis, the cash sales share increased by 0.8 percentage points in August 2015 compared with July 2015. The cash sales share typically increases month over month in August, though, so annual figures are a more reliable comparison. Year-on-year, cash sales accounted for 31.7 per cent of total home sales, down from 34.9 per cent in August 2014.

Alabama had the largest cash share of any state at 47.5 per cent, followed by Florida (45.2 per cent), New York (42.4 per cent), West Virginia (39.6 per cent) and Missouri (39.5 per cent). Of the nation’s largest 100 Core Based Statistical Areas measured by population, Florida accounted for four of the top five: Miami-Miami Beach-Kendall had the highest cash sales share at 51.7 per cent, followed by Philadelphia (51 per cent), West Palm Beach-Boca Raton-Delray Beach (50.8 per cent), North Port-Sarasota-Bradenton (48.5 per cent) and Fort Lauderdale-Pompano Beach-Deerfield Beach (47.7 per cent).

If the cash sales share continues to fall at the same rate it did in August 2015, the share should hit 25 percent by mid-2017, forecasts CoreLogic.