This, I Don't Believe
My friend, Frank Venis, sent me a link to a Planet Money/NPR story that 42.1% of home purchases are now in cash. I have been meaning to write up a quick post on the story since the story appeared, but my day job kept interfering.
The graph from the story is key. It is not my graph, so you will have to click through to see it. I just don't believe the data, which are from RealtyTrac. The jump in (what appears to be) July is too dramatic and out of character with the rest of the moves in the data series. The RealtyTrac report attributes the rise to increasing interest rates, but according to the same report interest rates on 30-year fixed mortgages are at or below what they were at the beginning of the time series in January 2011. Previous moves in the 3o-year fixed rate have not been associated with changes in the percentage of cash sales of the same magnitude.
The simplest and probably more likely explanations are a discontinuity in the data series. Was there a change in how the data in cash sales were collected or was there a change in how that variable was defined? RealtyTrac normally does a reasonably decent job of collecting and reporting data. The company's report does note a change in how short sales were defined but nothing about cash sales.