The latest Confidence Index, published by the National Association of REALTORS® (NAR), found that more home buyers are paying cash – 33 percent in the first quarter of 2014. Usually when that number goes up, it’s because the number of distressed home sales has gone up. But in this case, the number of distressed home sales has actually gone down, a fact that has economists puzzled.
“Distressed home sales, most popular with investors who pay cash, have declined notably in the past two years, yet the share of all-cash purchases has risen,” said Lawrence Yun, NAR chief economist. “At the same time, investors have declined as a market share, indicating other changes have been under way.”
A number of factors could explain the increase in cash purchases:
- Mortgage lending regulations.
- The baby-boom generation, and its accumulated equity, is retiring and trading down.
- Individual investors and purchasers of second or vacation homes usually pay in cash.
- Foreign buyers typically pay cash.
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