There are two nagging questions about the current Tri-Cities region housing market.
- If sales are at all-time highs and the inventory is tight, why haven’t prices increased more than the area’s typical conservative appreciation?
- Given the conditions in issue 1 – why aren’t we in a sellers’ market?
There are some good answers to those questions and NETAR President Eric Kistner has gone over them in his weekly columns. But one that hasn’t gotten much attention is cash sales. Normally you wouldn’t think that cash sales as a headwind for price appreciation. But they are.
If you were a buyer would you rather take a little less from a cash buyer or market and negotiate for a couple of months?
Many sellers – 3,573 of them to be precise – went the cash sales route last year. That’s almost half of all sales in the seven-county regional market. And since many of those sales came with some extra discount when the numbers are crunched it affected both the median and average annual sales price.
According to Attom Data Solutions cash sales nationwide dropped to a nine-year low in 2016 and accounted for 28.3% of all home sales.
Here in the Tri-Cities region that wasn’t the case. Cash sales were a little off the pace of previous years, but not that much.
Add distressed sales to the downward pressure exerted by cash sales, and you’ll see existing home sales price appreciation has some steady headwinds.
Another factor is the availability of new homes. Currently, builders are operating at less than half of their pre-recession capacity. That’s important because a healthy new home market tends to increase the sales price of existing homes.
Last year distressed sales were down in the Tri-Cities, but they still accounted for anywhere from 12% to 24% of total sales across the region.
Lump cash and distressed sales together, and you have touched a little more than 60% of all sales.