The National Association of Realtors® reported last week that first time buyers had increased their share of existing home sales in May by two percentage points and in a market where sales were up 9.2 percent in a year had increase their share of those sales by 5 points.  On Thursday we got, as a famous newscaster used to say, "The rest of the story." 

RealtyTrac reported, in its May 2015 U.S. Home & Foreclosure Sales Report that both cash sales and institutional sales have shrunk again during the month, and in the case of cash sales are nearly back to historical norms.  These sales had been cited as providing competition to traditional buyers both because they could close a transaction quickly and often bought without mortgage and perhaps even inspection contingencies.

Institutional investors, which RealtyTrac defines as entities purchasing at least 10 properties in a calendar month, purchased 2.4 percent of single family homes that sold in May, the lowest share in records going back to January 2000.  All cash purchases accounted for 24.6 percent of sales compared to 28.5 percent in April.  May cash sales were close to the long-term average since January 2000 of 24.8 percent and well below their recent peak of 42.2 percent in February 2011. 

Daren Blomquist, vice president at RealtyTrac said, "As housing transitions from an investor-driven, cash-is-king market to one more dependent on traditional buyers, sales volume has been increasing over the last few months and is on track in 2015 to hit the highest level we've seen since 2006.  And while sellers this spring are realizing the biggest average equity gains since 2006, home price appreciation is softening as the supply-and-demand balances tip more in favor of buyers and as banks began to clear out some of their more highly distressed foreclosures that sell at scratch-and-dent prices."

The price softening to which Blomquist referred was barely evident in the median price of all properties, both distressed and non-distressed, sold in May which were up 4 percent from April to $173,900 but were down 1 percent compared to a year earlier.  It was the first month of year-over-year declines after 36 months of annual increases.  Removing distressed properties from the equation also removes the year-over-year loss.  The median sales price of non-distressed residential properties that sold in May was $205,000, a 6 percent gain from April, a 9 percent year-over-year increase, and the 37th consecutive month for annual gains in that metric. The median price of distressed properties was $116,192, less than 1 percent higher than April, down 2 percent from the May 2014 level and the first decline after 13 months of annual gains.  

"Distressed sales in May represented a significantly smaller share of a growing home sales pie as an increasing number of non-distressed sellers continued to cash out on the equity they've gained over the last three years of rising home prices," Blomquist said. "But those distressed sales are still acting as a drag on home prices, selling at a median price that is 43 percent below the median price of a non-distressed sale - the biggest gap we've seen since we began tracking that distressed discount in January 2006.

The share of distressed sales dropped to a new low of 10.5 percent in May, down from 15.4 percent in April and from 18.3 percent a year ago to the lowest level since January 2011 - the earliest that RealtyTrac has this data.  Bank-owned sales accounted for 3.9 percent of all residential property sales in May, down from 6.9 percent in the previous month and down from 6.9 percent the previous month and down from 9.0 percent a year ago to the lowest level since January 2011.