story by Kim Souza
ksouza@thecitywire.com
Home sales across Northwest Arkansas and much of the country are being fueled in part by all-cash deals, short sales and institutional investors.
A new report from RealtyTrac revealed more than half of the home sales recorded during June in Benton County were for non-traditional buyers. Roughly 12% were institutional investors, one-in-three were all cash deals and 21% of the buyers purchased short sales. Short sales are residential properties where the sale price is below the combined total of outstanding mortgages secured by the property.
This is not a new dynamic in Benton County because a year ago investors made up 9% of sales and one-in-four were all cash, but there were no short sales according to the RealtyTrac report.
In Washington County, more than three-quarters of the sales last month were to institutional investors, all-cash deals or short sale transactions, according to the report. The investor presence rose to 29% in June, up from 5% in the year-ago period. All-cash deals comprised 43% of the total sales in the county in June. This number doubled from a year ago. Short sales were 5% of the Washington County market, compared to zero in June of last year.
Real estate analysts have said the entire market across the U.S. has been fueled with investors, which is not as healthy for the recovering economy as consumers purchasing homes for themselves. But this added demand is helping to drive up home prices, which is good for overall consumer confidence.
The RealtyTrac report confirms the buyer demand is there, but it’s not what typically comes to mind when thinking of home sales.
The Northwest Arkansas market has experienced an 8% jump in median home prices this year and agents point to stronger buyer demand and lower inventory levels for that recovery.
Daren Blomquist, vice president with RealtyTrac, said a flurry of institutional investors and cash buyers flocked into the single family market about a year ago, pushing up prices and picking clean the best inventory available in many areas.
He said this is not normal nor sustainable recovery, but the local markets across the country have been working through this changing dynamic.
“Rising home values should continue to unlock more non-distressed inventory while also pricing institutional investors out of more markets, which, combined with rising interest rates, will cool off the pace of price appreciation,” Blomquist said.
In markets like Arkansas where lingering distressed inventory is working its way back to listing, institutional investors and cash buyers are still lurking.
Jim Long, an agent with Crye-Leike Realty in Bentonville, said he has sold several cash deals this year. Most were low priced homes that didn’t qualify for traditional mortgages. He said the buyers often renovate the home and live it themselves. Though Long has not personally sold many homes to investors, he said they are in the local market scrapping for bargains, which are getting harder to find.
Bank-owned sales represented 10% of the transactions in the two local counties during June, this is up 5% a year ago. Long said bank-owned properties in good condition move very quickly. A foreclosure in Bella Vista that has been vacant for three years went on the market July 18. The property went under contract the following day.
The individual buyer said he had been looking for a single family home for several months.
“I knew I had to move quickly because I had already missed out on a couple of other properties.”