If cash sales are working their way back to their normal level and REO sales have been declining over the past several years, why are REO sales still claiming such a large share of cash sales? Boesel says, “This is simply a normalization of the market.”

“Most likely investors are still very active in purchasing REOs, and because their infrastructure to purchase is in place, they will most likely continue purchasing REOs with cash, keeping the REO cash share high and above the pre-crisis share,” Boesel told us.

“REOs will be a small part of the market, though,” Boesel said, “so they shouldn’t keep the overall cash share high.”

Data from RealtyTrac backs up Boesel’s view that investors are active in the market. The number of properties sold to institutional investors—investors that purchased at least 10 properties in a year— over the first seven months of this year is 29 percent higher than last year, according to RealtyTrac. This uptick follows two consecutive year-over-year declines.

With REOs dominating cash sales, RealtyTrac found that in the first quarter of the year, cash sales buyers paid 23 percent less per square foot than buyers with financing.

Is “Normalcy” on the Horizon

For the time being, Boesel expects overall cash sales and distressed sales to continue their march toward normalcy, while the REO cash sale share remains elevated, bolstered by investor demand.

“We can expect the market to continue to normalize,” Boesel said. “We would expect the REO share of total sales to decline, and we would expect that a majority of REO sales are financed with cash—think of these as investors coming in to buy up properties. We would expect the cash share of total sales to continue to decrease back to the more normal share of about 25 percent.”

If cash sales share continues to decline at its current rate, it should reach its pre-crisis level of 25 percent by mid-2018, according to CoreLogic. Similarly, if distressed sales continue their current rate of decline, they should reach their pre-crisis norm of 2 percent by mid-2018.