Cash deals raise Jan. sales of existing homes, report says

By Dina ElBoghdady
Washington Post Staff Writer
Wednesday, February 23, 2011; 11:24 AM

Sales of previously owned homes increased in January but were driven by all-cash deals that suggest investors are chasing after foreclosures and other bargains in an ailing housing market, an industry group reported Tuesday.

Sales rose 2.7 percent to a seasonally adjusted 5.36 million in January from December, according to the National Association of Realtors. The purchases-- which include single-family homes, condominiums and townhouses - were up 5.3 percent from a year ago.

The data reflect an improved economy but also show abnormally high levels of all-cash purchases, said Lawrence Yun, the group's chief economist. These purchases are at their highest level since the group starting tracking the monthly numbers in October 2008. The surge suggests that stringent lending rules are shutting out conventional buyers so that only people with hefty sums of cash can close deals, Yun said.

Investors made up 23 percent of purchases in January, up from 20 percent in December and 17 percent in January 2010. Meanwhile, all cash sales rose to 32 percent in January from 29 percent the previous month and 26 percent in January 2010.

These increases "go hand-in-hand" with the swell in foreclosures and other distressed properties, Yun said. These types of properties have been an unhealthy share of the existing sales market, about 37 percent in January, up from 36 percent the previous month.

"It's not surprising to see so much activity where cash is king and investors are taking the advantage of conditions to purchase undervalued homes," Yun said.

Some economists have suggested that the National Association of Realtors's numbers are inflated, possibly because of the methodology it uses. Most recently, mortgage research firm CoreLogic said the numbers could be overstated by 15 to 20 percent. The Realtors group has agreed to review its numbers and is reviewing its 2010 estimate.

The group said sales were up in every part of the country in January except in the Northeast, where they fell 4.6 percent.


The supply of homes fell 5.1 percent to 3.38 million. That represents a 7.6-month supply, meaning it would take that long to sell all the existing homes on the market at the current sales pace.

Median prices fell 3.7 percent to $158,800 in January, mostly likely because foreclosures are still dragging down prices.

The group, as it does every year, revised its historic data for 2008 through 2010 and described the tweaking as "minor, with little or no impact on previous characterizations of the overall market."

According to those numbers, the seasonally adjusted annual rate of existing sales for last year was 4.9 million, down from 5.2 million in 2009 and about even with the 4.91 million in 2008.

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