Nearly half of all home purchases in the month of September were paid for in cold hard cash, as tight lending conditions continue edge out traditional buyers and investors continue to scoop up inventory.
All-cash deals accounted for 49% of sales across the U.S., according to a new report from RealtyTrac. That’s up from 40% in August and 30% in September of 2012.
The Irvine, Calif.-based real estate site’s latest U.S. Residential & Foreclosure Sales Report shows that, nationwide, residential properties sold at an annualized pace of 5.67 million homes per year, up 2% from August and up 14% from a year ago. The numbers from Realtytrac, which tracks activity for both distressed and non-distressed transactions using recorded sales deeds and loan data across 38 states, come in higher than the 5.29 million annualized pace posited by the National Association of Realtors in its Monday existing-home sales report.
While higher mortgage interest rates have caused some traditional consumers to shy away from purchases in recent months, cash-flush investors, from mom-and-pop landlords to Wall Street firms, have remained exceedingly active. In September institutional investors accounted for 14% of all sales, a new high since RealtyTrac began tracking this emerging demographic, defined as buyers who have acquired 10 or more properties over the past 12 months, in January 2011.
Institutional buyers, whose financing come from all reaches of Wall Street, have exploded onto the market in the past two and a half years, typically acquiring distressed inventory to rehab into income-producing single-family rentals.  Private equity firms, hedge funds, and Real Estate Investment Trusts have funneled an estimated $20 billion into the housing market over the past several years, acquiring upwards of 200,000 houses to rent out to the ever-growing legions of Americans who, for a variety of reasons, can’t or don’t want to take out a mortgage and buy a home themselves.
Blackstone Group’s Invitation Homes is by far the largest landlord in this arena, having spent $7.5 billion on an estimated 40,000 houses over the past two years. Other companies like American Homes 4 Rent, American Residential Properties, and Silver Bay Realty Trust SBY -1.02% have snapped up thousands of homes and bundled them into public offerings as single-family rental REITs.  Still others, like Five Ten Capital, have accessed nine-figure credit facilities from Deutsche Bank DB -1.23% with the longer term plan to securitize the debt. And according to Bloomberg , Deutsche Bank could begin marketing $500 million worth of bonds backed by Blackstone’s massive portfolio’s rental income as soon as this week.
Distressed transactions, comprised of homes in foreclosure or bank-owned, accounted for 25% of all sales last month, up from 18% a year ago. Nationwide the median price of a distressed sale was $112,000 — 41% below the $189,000 median price of a non-distressed property.
“Distressed sales remain persistently high, particularly short sales,” explains Blomquist. “Markets with the biggest increases in short sales tend to be those where either foreclosure starts or scheduled foreclosure auctions have rebounded in the last 18 months — translating into more motivated short sellers — or those with a still-high percentage of underwater homeowners with negative equity.”