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Th e M Rep o RT | 49 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ANALYTICS Department cash sales decline for 24th consecutive month At its current rate of decline, cash sales share will reach pre-crisis levels in mid-2017. c ash sales made up 35 percent of all home sales in December 2014, according to data released by CoreLogic. December marks the 24th consecutive month of declines in cash sales share year-to-year. Because of seasonality, cash sale comparisons are most telling when looking at year-to-year data. Cash transactions hit their peak in January 2011 when they made up 46.5 percent of total home sales. Before the housing crisis, the cash sales share of total home sales averaged about 25 percent. If the trend of cash sales decline continues at its current rate, the share should reach 25 percent by the middle of 2017. Cash sales of REOs increased the most from 2000 to 2014 and had the largest cash sales share in December 2014 at 58.4 percent. Resales had the second-largest share of cash sales at 35.4 percent, while the cash sales share among short sales stood at 32.7 percent. At 15.6 percent, newly constructed homes had the smallest share of cash sales. While the percent- age of REO sales that were cash transactions remained high, REO transactions made up only 8.8 percent of all sales in December and, therefore, had a small influ- ence on the overall cash sales share. In January 2011, when the cash sales share was at its peak, REO sales made up 23.9 percent of total sales. Cash sales varied by state with Alabama posting the largest share of any state at 52.2 percent. Florida, New York, Michigan, and Idaho all had high cash sales percentages with Florida at 50.3 percent and Idaho at 42.9 percent. Maryland, Washington, Colorado, and Minnesota had lower num- bers in cash sales with Maryland coming in last at 19 percent. Of the nation's largest 100 Core Based Statistical Areas (CBSAs) measured by population, Detroit- Dearborn-Livonia, Michigan had the highest share of cash sales at 65.9 percent; followed by Miami- Miami Beach-Kendall, Florida, at 58.3 percent; West Palm Beach- Boca Raton-Delray Beach, Florida, at 57.2 percent; Fort Lauderdale- Pompano Beach-Deerfield Beach, Florida, at 56.3 percent; and Cape Coral-Fort Myers, Florida, at 55.6 percent. Syracuse, New York, had the lowest cash sales share at 15 percent. Housing more affordable now than in Pre-bubble years For the national payment-to-income ratio to reach pre-bubble levels, home prices would have to rise 25 percent or interest rates would have to rise 2 percent. t he national mortgage payment-to-income ratio sits at 21 percent, according to Black Knight Financial Services' latest release of its Mortgage Monitor Report released in March. The report, which is based on data from the end of January 2015, notes despite two years of home price increases at the national level, affordability is better now than it was in the years prior to the housing bubble. This is due primarily to the current low interest rate environment. The payment-to-income ratio now stands above the 26 percent average seen during the 2000-to- 2002 period just prior to drasti- cally increasing home prices. The ratio is up from the 17.6 percent ratio seen in October 2012 but down from the July 2006 high of 34.7 percent. Home prices could rise another 25 percent, or interest rates could jump 2 percent, before the affordability ratio would reach pre-bubble levels. Level of affordability varies by state with Washington D.C., Hawaii, and Alaska markets all less affordable now than in the pre-bubble years. In Washington, D.C., the current payment-to- income ratio is 40 percent, which is lower than the 62 percent ratio shown at the peak of the hous- ing bubble. Michigan, Texas, and Florida currently have ratios under the national average, with Michigan at 16.9 percent. California affordability ratios are nearing pre- bubble levels only 1.3 percent off the 2000 to 2002 ratio. Illinois and Mississippi ratios are 10 percent lower than pre-bubble numbers. Washington, D.C., Hawaii, and California currently have the least- affordable housing markets in the country. The payment-to-income ratio in California is 32.5 percent, second only to Washington, D.C. Indiana is currently the most affordable state in the country with a ratio of 12.6 percent, while Michigan follows in second place with a ratio of 13.3 percent. A 1 percent increase in interest rates could push an additional seven states above 2000-2002 pay- ment-to-income levels. Delaware, California, Maryland, New York, Minnesota, North Dakota, and Wyoming would be less afford- able than pre-bubble years with the slight increase. In a few states, incomes have kept up with home prices. For example, in Connecticut the me- dian household income grew 30 percent, while the median home price increased 31 percent, result- ing in a home price-to-income ratio increase of 1.04 percent. Homes in states where the prices have significantly outpaced income are seeing payment to income ratios near or above pre- bubble levels, even with interest rates down 4.35 percent from early 2000. Delaware's median household income grew 5 percent compared to its median home price increase of 47 percent, result- ing in a home price-to-income ratio increase of 10.07 percent. Overall, the U.S. median house- hold income increased 23 percent, while the median home price increased 41 percent. The change to payment-to-income ratio in the U.S. from the 2000 bubble is 5 percent.

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