Cash Sales Dominate Lower Market Value Sector

Cash sales made up 35 percent of all first quarter homebuying transactions, according to new data from Black Knight Financial Services (BKFS). This is below the 37 percent level from the first quarter of 2015 and the 45 percent peak set in the first quarter of 2011.

However, while cash sales make up 30 percent of purchases in the top 20 percent of market value, they constitute nearly two-thirds of the home buying transactions in the bottom 20 percent of market value.

“As the inventory of distressed properties has dried up nationwide, the overall share of cash sales has been on the decline as well,” said Black Knight Data & Analytics Senior Vice President Ben Graboske. “The prevalence of cash sales at the low end of the market can likely be chalked up to two primary factors. First, negative equity is still higher than average among this segment of the market, resulting in increased distressed discounts for buyers. Second, lower-priced homes simply require less capital to purchase outright, making cash sales possible for more people.”

Separately, Black Knight is also reporting that home equity lines of credit (HELOCs) have recorded annual delinquency rate increases in two of the past six months. This is the first time such increased have occurred since June 2012. The company credits this situation to an 87 percent spike in delinquencies among 2005 vintage HELOCs over the past 12 months, which ended their draw periods and began amortizing in 2015. The 2006 vintage HELOCs that began amortizing this year make up approximately 17 percent of active HELOCs and the 2007 vintage is another 18 percent, which the company forecasts as contributing to a continuation of this trend.