When it comes to home sales, cash is still king. More than half of all homes sold in 2012 and so far in 2013 have been purchased without a mortgage, according to an analysis by economists at Goldman Sachs Group.
While some 20 percent of homes sold before the housing downturn were all-cash, that share has risen by more than 30 percent percentage points in the past seven years, the economists said.
They analyzed home sales figures from the U.S. Census Bureau and the National Association of Realtors and mortgage-origination data from the Mortgage Bankers Association and Lender Processing Services.
That jump in cash sales helps explain why home sales overall have risen over the past two years despite smaller increases in mortgage activity, the Wall Street Journal said, adding that cash buyers were likely a combination of investors, foreign buyers and wealthy homeowners.
Purchase-mortgage origination volumes have fallen to around $500 billion in each of the last two years from around $1.5 trillion in 2005, when the housing market peaked, the Journal said. The economists estimate that some 40 percent of that decline is due to the drop in mortgage financing and expect purchase loan volumes will rise to around $750 billion next year and to $1.1 trillion by 2016.
Source: Wall Street Journal