Back in May, I posted an article on Minyanville asserting that all-cash buyers have kept several major housing markets from collapsing. (See All-Cash Buyers Preventing Collapse of Housing Markets.) With new evidence in to support this claim, now is a good time to revisit this important issue and broaden the examination.

In major housing markets such as Las Vegas, Phoenix, and Miami, investors have played a growing role in the past year. In July, Inside Mortgage Finance (or IMF) reported in its monthly Housing Pulse Survey report that 75% of investor purchases nationwide in June were all-cash transactions. These investors focused their attention on what IMF calls “damaged REOs.” The June survey revealed that 59% of damaged REO sales were to investors.

In its annual Survey of Vacation and Investment-Home Buyers, the National Association of Realtors reported in March that 59% of all investors surveyed had paid cash for their property in 2010. That was up from only 17% in 2004.

Some analysts have claimed that the growth of all-sale purchases by investors is a positive development for these major housing markets. Are they right? Or is it a sign that “normal” home sales by owners with equity in the property is relentlessly shrinking?