Cash sales have accounted for about one of every three local existing home sales since the first of the year. That was down in May and well below the peaks a decade ago.
And despite persistent claims that out-of-state buyers overbidding locals and paying with cash was the primary driver of higher local home prices, the data shows there is more to the story.
May’s cash sales decrease was small – 29% of sales compared to 35.1% in April. At the same time, the average price for those sales ($220,000) was the highest it has been so far this year and only $30,000 below the typical regional sales price. That’s a big change. The average cash sale was for less than the list price in January, February, and March.
The market share of cash sales is also a big change. Long before the current influx of new residents cash sales were a stronger market player. In both 2012 and 2013, they accounted for more than half of all sales in both the Johnson City and Kingsport-Bristol metro areas.
Home prices for the first three months of the year averaged $174,483, and they sold for an average of $4,604 under the list price. That doesn’t mean some buyers in the higher price ranges didn’t pay the list price, or even more than list – but it does show that the number paying under list is skewing the total lower.
Investors have also been stepping up purchases as the rental market booms. And flippers also are active players in cash sales discussions. During the first quarter, there were 184 purchases for flips and almost 70% were cash sales. Most of those sales were in the sub $100,000 price range. The homes they buy, renovate and sell typically account for about 10% of all existing home sales.
The bottom line is the increase in local home prices is driven by multiple factors and there’s no silver bullet to explain it.
Categories: REAL ESTATE
Good info… As a local lender I am seeing out of town buyers finance homes, but often with sizeable down payments… and the ability to pay all cash if needed.