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All-cash home buyers increase

Tuesday - 5/27/2014, 7:42am  ET

Cash is king. And the king is making his presence felt in the housing market, which showed its first expansion of the year last month.

Cash purchases, which usually make up about a quarter of home sales, have soared to about 40 percent nationwide, The Washington Post reported, citing research firm CoreLogic.

Wealthy people, foreigners and retirees are transforming markets across the United States with these all-cash deals. And their timing is good for the market because they are helping to make up for a shortage of first-time buyers who are struggling to save for a down payment or qualify for a loan. That is a cause of grave concern about the long-term health of the market and its prospects for a true recovery.

The potential yield from rents is what attracted investors to the housing sector once the market hit bottom in late 2011. In areas where home prices plunged, investors began snapping up foreclosures and other deeply discounted properties, betting they could rent them for a tidy profit. The buying frenzy helped clear the excess supply of homes on the market and boost prices. It also frustrated first-time buyers who could not compete because their offers included financing contingencies, appraisals and inspections.

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