The portion of home purchases made with all cash fell in the first quarter compared with a year ago in a majority of metro areas nationwide, as investor-driven activity fades and more traditional buyers re-enter the market, according to a new analysis from real estate portal Zillow.
In the Boston metro area, cash purchases dipped from 29.5 percent in the first quarter of 2013 to 28.3 percent for the first quarter of 2014. However, that figure is up from 24.2 percent in the fourth quarter of last year. According to Zillow, cash purchases peaked at 34.4 percent in the first quarter of 2005 in Boston.
The share of cash buyers fell year-over-year in 102 of the 126 total metro areas analyzed by Zillow. Among the top 30 largest metros, the share of cash buyers was highest in the first quarter in Miami (64.9 percent), Tampa (57.1 percent) and Cleveland (54.2 percent). Large metros with the lowest share of all-cash sales in the first quarter were Virginia Beach (17.4 percent), Denver (22.4 percent) and Portland (22.9 percent).
Zillow also examined the share of cash sales made in the bottom, middle and top one-third of home values, and the portion of sales made by individual buyers and business buyers in each market. In 27 of the top 30 metros, including Boston, more than one third of all sales of the lowest-priced homes were made with cash. In three of the top 30 metros – Tampa, Detroit and Miami – more than 80 percent of all sales in the lowest price bracket were cash deals.
Among all sales in the Boston metro in the first quarter of 2014, 36.5 percent of sales in the bottom tier were made in cash, 19.7 percent of sales in the middle tier were made in cash, and 25.5 percent of sales in the top tier were made in cash.
"Even as the share of all-cash sales falls in many areas, it’s pretty clear that cash is still king, especially at the lower end of the market," Zillow chief economist Stan Humphries said in a statement. "It can be difficult for more traditional buyers to compete with cash offers, especially in a tight inventory environment and among cash-strapped first-time buyers most likely to seek lower-priced properties. Housing is much more than an investment for most buyers, and it’s heartening to see more buyers armed with traditional financing begin to enter the market. This is a critical step on the way back to a more normal, balanced housing market."
Individual, non-business buyers were more likely to buy bottom-tier homes with cash in the first quarter – in 20 out of the top 30 metros, the portion of sales that were all cash in the bottom tier was more than double that in top-tier homes, according to Zillow’s analysis. Business buyers, on average, were more likely to pay all cash in home purchases than individual buyers. In 11 of the top 30 metros, more than 90 percent of homes purchased by business buyers in the bottom price tier were all cash.
