"You're seeing an increase in cash deals at both ends of the price distribution curve," Khater said in a telephone interview from Vienna, Virginia. "You're seeing it in the hardest hit areas, where investors are coming in and picking up low-priced properties. And you're seeing higher cash activity at the upper end as well."
New-home sales fell to an annual pace of 250,000 in February, an all-time low in records dating to 1963, the Commerce Department reported March 23. Existing-home sales dropped to a 4.88 million annualized pace in February, down 2.8% from a year earlier, the National Association of Realtors said March 21, while the median price of existing homes fell to $156,100, the lowest since February 2002.
Record Affordability
Housing affordability is at an all-time high, according to records dating to 1970 from the Realtors group. Average monthly payments, based on home prices and mortgage interest rates, dropped to 13.1% of the median family income in January, the most recent month available, from 23.2% in 2006 at the peak of the housing bubble.
Lenders, who fueled the housing bubble with lax mortgage underwriting, are now too restrictive, said Molony, the Realtors spokesman.
"Lenders have only been willing to lend to the cream of the crop in terms of credit scores," he said in a telephone interview from Washington. "As a result you're seeing a depressed level of traditional buyers."
FICO credit scores for loans insured by the Federal Housing Administration, a government program that extends credit to borrowers with down payments as small as 3.5%, rose to an average of 703 in February, up 10 points from a year earlier, on the scale of 300 to 850. FICO scores, developed by Fair Isaac Corp., for FHA loans averaged 647 in February 2008. They climbed after the FHA imposed minimum scores for the first time in October and banks added stricter credit overlays.
Mortgage Bankers' View
The weighted average FICO score for a home purchased with a Fannie Mae mortgage was 762 last year, up from 716 in 2006, the Washington-based mortgage finance company reported Feb. 24. Fannie Mae loans, which usually require a 20% down payment, had an average 68% loan-to-value at origination.
"It's not surprising that the cash share has gone up if you couple both the number of distressed sales that are going on and the fact that, even outside of a foreclosure auction, mortgage credit is tightening," said Michael Fratantoni, vice president of research at the Mortgage Bankers Association, a Washington-based trade group.