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National Home Cash Sales Drop for March

decreasing-twoFor the 27th consecutive month, cash sales made have fallen to 34.6 percent of total home sales nationally in March 2015, down from 39 percent in March 2014, according to CoreLogic data released today.

An all-cash real estate transaction means that the buyer will not use financing, but will pay cash for the property, according to Investopedia.com. The site notes that there could be a few negatives when paying cash for properties, such as tax consequences since there is no mortgage interest tax deduction involved or the loss of investment return on the money that the buyer puts toward the purchase.

Cash sales shares have fallen each month since January 2013, according to CoreLogic. Month over month, the cash sales share fell by 2.8 percentage points. Cash sales share comparisons should be made on a year-over-year basis due to seasonality in the housing market.

In January 2011, the cash sales share peaked at 46.5 percent of total home sales nationally, the data found. The cash sales share of total home sales averaged approximately 25 percent before the housing crisis. If the cash sales share continues to decline at the same rate it did in March 2015, the share should reach the pre-crisis level of 25 percent by mid-2016.

"Majority of cash buyers are investors and given that the market is overvalued, it would drive down the amount of cash or investment activity," said Sam Khater, deputy chief economist at CoreLogic.

According to the CoreLogic data, the real estate-owned (REO) sales had the largest cash sales share in March 2015 at 56.2 percent. Resales followed with a share of 34.5 percent, short sales at 31.6 percent, and newly constructed homes at 14.9 percent. Although the percentage of REO cash sales remained high, REO transactions only made up 8.4 percent of all sales in March. In January 2011, when the cash sales share was at its peak, REO sales made up 23.9 percent of total home sales. Resales, on the other hand, made up a large portion of home sales at about 80 percent, therefore having the most impact on the total cash sales share.

The statewide CoreLogic data found that Florida had the largest share of any state at 51.8 percent. Alabama followed with 50 percent of cash sales shares, New York had 46.5 percent, New Mexico had 42.2 percent, and Michigan had 41.3 percent.

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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