"Strict lending standards combined with low inventory continue to give the advantage to investors and other cash buyers in this housing market," said Daren Blomquist, vice president at RealtyTrac.

Indeed, institutional investors, which bought large swaths of distressed properties in the past few years, are actually slowing their purchases, down to just 5.6 percent of all U.S. residential sales in the first quarter of 2014 from 7 percent one year ago, said RealtyTrac.

The demand is high, supply is low and that is precisely why more homebuyers today are relying on cash to be competitive. It is not just investors.

Even as deep-pocketed institutional investors pull back on buying homes, all-cash deals accounted for an all-time high of 43 percent of total homes sales in the first quarter, according to RealtyTrac .

Cash is king in Florida, where foreign buyers outnumber the locals, but other markets are seeing more than half of all sales go to cash buyers: New York (57.0 percent), Columbia, South Carolina, (56.1 percent), Memphis, Tennessee, (54.9 percent), Detroit (53.5 percent), Atlanta (53.2 percent) and Las Vegas (52.2 percent), according to RealtyTrac.



The National Association of Realtors is also reporting a growing number of all-cash buyers, but they point to a new cash cohort.



"The restrictive mortgage lending standards are a factor, but the higher levels of cash sales may also come from the aging of the baby boom generation, with more trade-down and retirement buyers paying cash with decades of equity accumulation," said Lawrence Yun, chief economist for the NAR.



Boomers, however, are not the vast majority of the market. First-time home buyers as well as the move-up, credit-dependent buyers are the bread and butter of a normal housing market. They are losing out, as prices soar, fueled by cash.



"It's making it harder for an ordinary single family who's getting a mortgage to compete as a buyer, especially given how constrained inventory is, and that's making for frustrated buyers in a lot of these seller's markets," said Spencer Rascoff, CEO of Zillow, an online real estate marketing and data company.



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Credit availability is clearly not easing much, although buyers of more expensive properties, who need so-called jumbo loans, are doing better than the rest of the market, according to the Mortgage Bankers Association.



"On one hand, credit continues to be more available to jumbo borrowers, particularly those seeking adjustable-rate mortgages, and we are beginning to see some loosening within conventional and FHA programs for conforming loans. On the other hand, some investors shut down or tightened criteria for certain programs," said Mike Fratantoni, MBA's chief economist.





