Fewer buying homes with cash, study finds

Far fewer people used cash to buy a home in the second quarter when compared with the first three-month period of the year, RealtyTrac reported recently.

For those who were in the market to buy a new residence between April and June, new numbers suggest that they were more likely to have gone about the purchase process by applying for a loan – which usually requires a purchase of home insurance – than use cash.

Roughly 38 percent of single-family home sales during the second quarter were all-cash, according to newly released numbers from RealtyTrac. Though slightly higher when compared to the same period last year, all-cash sales were down substantially from the first quarter, when 42 percent of home purchases were paid with dollar bills.

"The flurry of purchases by institutional investors and other cash buyers that kicked off two years ago when U.S. home prices hit bottom is finally showing signs of subsiding," said Daren Blomquist, vice president of RealtyTrac. "Over the past 10 quarters cash sales have accounted for 39% of all home sales on average, and institutional investor purchases have accounted for 5.3% of all home sales on average."

He added it was a very different story between 2001 and 2011, when the average quarterly cash share was 30 percent and 2.6 percent among institutional investors, roughly half the total of this past second quarter.

Good news, bad news of fewer all-cash buyers

Blomquist also stated that there are positives and negatives to take away from there being fewer all-cash home sales. On the bright side, first-time homebuyers should have a better chance at nabbing the residence they most want, as fewer cash buyers usually lends to there being plenty of houses to choose from. The bad news is that asking prices may have already reached a point that pushes them out of the market due to being too expensive.

Applying for a loan typically requires several things in order to be approved, such as a copy of the buyer's credit history, proof of employment and information on any other loans that have been taken out. Mortgage companies may also require home insurance to cover the lender's losses should there be a disaster.

Along with there being fewer cash real estate purchases, home buying is down in general. The ownership rate dropped to 64.7 percent in the second quarter from 65 percent based on year-ago levels, according to the U.S. Census Bureau. The last time it was this low was in 1995.