All-Cash Sales Are Declining—and That’s Good for Home Buyers

When the housing market collapsed at the end of 2008, an odd thing happened—Wall Street investors became single-family-home buyers. But the end is near. Hedge funds are losing their lust for houses, opening the door back up to traditional buyers.


Investors understood the adage, buy low and sell high. With money pouring in from around the globe, investors formed REITs and hedge funds targeting America’s housing stock as the new publicly traded commodity. Now, however, cash sales are on the decline, and that’s good news for home buyers. At their peak in 2011, all-cash sales accounted for more than 46% of all home sales nationwide.

With low interest rates and easing credit restrictions, buyers are taking advantage of off-peak prices and becoming homeowners. Cash sales made up just 36% of all home sales at the end of 2014, marking the 23rd straight month of decline, according to CoreLogic, a California-based real estate analytics provider.

At the current rate, CoreLogic is predicting the share of cash investors to reach pre-housing-crisis levels of just 25% by 2017. Of course, there are still markets attracting lots of cash buyers, most in Florida—Miami (57%), West Palm Beach (56%), and Fort Lauderdale (55%), according to CoreLogic. Washington, DC, on the other hand, has the lowest level of cash buyer activity at just 16%, according to CoreLogic.

For regular home buyers, that’s good news. With cash-flush investors in the mix, regular buyers had to fight bidding wars in hot markets, and their need for financing put them at a disadvantage. Now that Wall Street’s appetite for housing is waning, entry-level buyers may finally be able to get a foot in the door, literally.

But don’t sleep. Wall Street is still changing the game. Those same hedge fund managers who were buying up houses throughout the recession have transitioned to managing their rental portfolios. It’s no longer about flipping; it’s about holding. This is the long game. So, if you’re renting a single-family home and enjoying the perks of suburban living, don’t be surprised if your landlord is actually Gordon Gekko, or one of his real-life counterparts.


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