Cash buyers, principally investors, may be putting downward pressure on home prices according to the Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey released Monday.  The survey found that investors with cash in hand are able to offer something that homeowners dependent on mortgage financing cannot, a guaranteed sale with a quick closing timeline.  This seems to offset the desirability of a higher bid with a mortgage contingency.   

The Housing Pulse survey found that the trade-off between price and speed is particularly true with offers on distressed properties because the lenders and servicers liquidating the properties generally prefer transactions that can settle within 30 days.  The Campbell report states, "While investor bids may not be the first offers accepted, they often end up winning properties after other homebuyers are eliminated because of mortgage approval or timeline problems. Appraisals below the contracted price are a common reason for mortgage denials. Most mortgage financing timelines are now in excess of 30 days."

The survey reports that 33.2 percent of home buyers in December were cash buyers, up from 29.6 percent in December 2010.  However, 74 percent of investors came to the table with cash.  This is especially striking as the survey found that investors accounted for 22.8 percent of home purchases in December, changed only slightly from 22.2 percent in November.  But, Campbell says, "Despite their relatively small share among homebuyers, investors have an outsize effect on home prices because their bids bring down market prices."

Real estate agents responding to the survey commented on the low bids they are seeing from investors.  Campbell quoted anecdotal information from a few agents indicating they are seeing investor bids 10-20 percent below list prices, but with quick closings.

The total share of distressed properties in the housing market in December continued at a three-month moving average of 47.2 percent, the 24th consecutive month that the HousePulse Distressed Property Index (DPI) was over 40 percent.

The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves approximately 2,500 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.