All-cash buyers of single family homes and condos nationwide paid 23 percent less per square foot than all homebuyers, but that cash buyers in 9 percent of local housing markets paid a premium price per square foot. This data comes from the recently released RealtyTrac®Q1 2016 U.S. Cash & Institutional Investor Housing Market Report.
Nationwide all-cash buyers purchased single family homes and condos for a median $91 a square foot in the first quarter of 2016, a discount of 23 percent below the median $118 per square foot for all home purchases.
“While large institutional investors and other cash buyers continue to shrink as a share of U.S. home sales, these buyers still typically beat out traditional buyers using financing — in some cases even when they submit a lower offer for a home,” says Daren Blomquist, senior vice president at RealtyTrac. “Additionally cash buyers are often willing to take on properties in poor condition that may not readily qualify for standard financing, another reason why cash purchases normally sell at a lower price per square foot.
“Markets where we see the opposite — with cash buyers actually paying a premium price per square foot — could be in danger of overheating,” Blomquist adds. “In most markets, cash buyers act as an anchor for home values, but in these exceptions to the rule, cash buyers are acting as an oversized sail, catching more wind and pushing home price appreciation to a potentially precarious pace.”
Markets with biggest cash buyer discounts
Among 99 metropolitan statistical areas with at least 1,000 single family home and condo sales in the first quarter of 2016 — and with sufficient home price and loan data collected from public records by RealtyTrac — those where cash buyers realized the biggest discounts were Baltimore (58.2 percent discount); Harrisburg, Pennsylvania (52.0 percent discount); Akron, Ohio (50.2 percent discount); Birmingham, Alabama (49.3 percent discount); and Columbia, South Carolina (48.3 percent discount).
Other markets with cash buyer discounts ranking in the top 10 highest in the first quarter of 2016 included Cleveland, Ohio (47.4 percent discount) and Memphis, Tennessee (43.7 percent discount).
Markets where cash buyers paid a premium
All-cash homebuyers in the first quarter paid a premium price per square foot in nine of the 99 metro areas analyzed (9 percent), led by Honolulu (6.6 percent premium); Seattle (5.2 percent premium); San Francisco (4.8 percent premium); Naples, Fla. (3.9 percent premium); and San Diego (2.5 percent premium).
Other markets where cash buyers paid a premium per square foot for homes purchased in the first quarter were San Jose, Calif. (2.2 percent premium); Los Angeles (2.2 percent premium); Cape Coral-Fort Myers, Fla. (1.5 percent premium); and Oxnard-Thousand Oaks-Ventura, Calif. (0.2 percent premium).
While cash buyers still realized a 14.2 percent discount in the greater New York metro areas, buyers in New York County (Manhattan) paid a 5.0 percent premium price per square foot.
The 9 percent of markets where cash buyers paid a premium in the first quarter of 2016 is up from 5 percent of markets where cash buyers paid a premium in the first quarter of 2015.
Institutional investor share down annually for 11th consecutive quarter
Institutional investors — entities that purchase at least 10 single family homes and condos in a calendar year — accounted for 2.6 percent of all single family home and condo sales in the first quarter, down from 4.0 percent in the previous quarter and down from 3.4 percent a year ago. The year-over-year decrease in the first quarter marked the 11th consecutive quarter where the institutional investor share of sales has decreased on a year-over-year basis.
The share of institutional investor home purchases in the first quarter of 2016 decreased from a year ago in 87 of the 110 metro areas (78 percent), including, among the nation’s 20 largest metro areas, San Francisco (down 64 percent); Seattle (down 57 percent); Riverside-San Bernardino, Calif. (down 57 percent); San Diego (down 52 percent); Los Angeles (down 44 percent); Detroit (down 41 percent); and Dallas (down 38 percent).
Markets with highest share of institutional investors
Among 110 metro areas with at least 1,000 single family and condo sales in the first quarter, those with the top five highest share of institutional investor purchases were Birmingham, Ala. (9.9 percent); Augusta, Ga.(7.4 percent); Memphis, Tenn. (7.0 percent); York-Hanover, Penn. (6.9 percent); and Atlanta (6.7 percent).
Metro areas with the biggest year-over-year increase in share of institutional investor purchases in the first quarter were Birmingham, Ala. (up 582 percent); Knoxville, Tenn. (up 98 percent); Crestview-Fort Walton Beach, Fla. (up 94 percent); Pittsburgh, Penn. (up 85 percent); and Albuquerque, N.M. (up 84 percent).
For more information, visit www.realtytrac.com.