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A Stunning 80% Of All New York, Florida And Nevada Condo Purchases Are "All Cash"

Tyler Durden's picture




 

Back in August of last year, we first reported data that not even believed at first, but has since been proven correct using existing home sales data, namely that a whopping 60% of all home purchases are "cash only." Furthermore, in the eight months since that post, our conclusion has also borne out as absolutely correct:

... due to the very thin marginal source of bidside interest (flipper flipping to flipper and so on), it means that most of America has not participated in this mirage "recovery", and all it will take to send the buoyant housing market crashing is for the one marginal buyer to become a seller. What they will next find, is that when dealing with a bidside orderbook that has zero depth, one indeed takes the escalator down from where the lofty heights achieved courtesy of Fed-funded stairs.

The subsequent tumble in the housing market - both new and existing - confirmed that ther was no "housing recovery" and it was, as we had claimed all along, merely institutional investors bidding up real estate to convert it to rental, and foreign buyers parking illegally obtained cash in US real estate.

However, not even that data could prepare us for what we learned today courtesy of CoreLogic, which narrowed down the range from the broader "housing" segment just to the most appetizing (especially for investors and flippers) condo market. What it found was stunning: not less than 80% of all condos in key markets such as Florida, Nevada And New York are all cash.

Below is CoreLogic's take:

As of January 2014, Florida and Nevada have the highest cash share for condos across the country with shares of 81.2 percent and 80.5 percent respectively. These high rates could be because of several factors including investors buying up properties and the overall shrinking of the mortgage market. Following the leaders are New York (79.5 percent), Alabama (75.7 percent) and Arizona (65.7 percent). These five state account for just over half of all condo cash transactions across the country, with Florida representing 36.7 percent of the total alone. This is more than three times California, which accounts for 10.3 percent of the total condo cash transactions across the U.S.

 

On the low end, of the largest 25 states by total sales transactions Virginia had the lowest cash share of condos at 32.4 percent followed by Massachusetts (36.7 percent), Minnesota (38.2 percent), Wisconsin (38.7 percent) and Maryland (38.9 percent). These five states only account for 4.8 percent of all condo cash transactions across the country.

 

The trend for the two highest share states of Nevada and Florida can be broken into three distinct categories over time from January 2000 to January 2014. The pre-recession period-when credit was readily available to purchase condos, the recession-when credit standards tightened and the market contracted making it more difficult to finance a condo and post-recession-where investors play an increasing role in propping up the shares, while the mortgage market continues to shrink.

 

From 2000 through 2007, Nevada and Florida had an average condo cash share of 22.9 percent and 35.4 percent respectively. During the recession, shares spiked and Nevada, post-recession, has since averaged 85 percent while Florida is averaging 81 percent. The effect of the recession has pushed condo cash shares much higher than pre-recession levels over the past five years and it doesn’t look like that is changing in the short term.

Or, making a rough estimate, "all cash" purchases in the hottest condo markets have soared roughly three-fold in the key investor markets since the last housing bubble!

Without repeating our conclusion from nearly a year ago, what this simply means is that there is absolutely nothing remotely resembling a housing recovery, and certainly not one where the end buyer has to use the house itself as loan collateral, which would be the vast majority of the population, but instead more than three-quarters of all condo purchases are purely by investors who have already piled up cash using other forms of collateral (and thus aren't traditional home purchasers but merely flipping-focused investors), and who will flee from this market the second the Fed starts tightening monetary conditions, which in turns will make the next housing crash far worse even than the 2008 housing and credit bubble collapse.

 

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Thu, 04/24/2014 - 12:49 | 4691101 FredFlintstone
FredFlintstone's picture

Raped with condo fees.

Thu, 04/24/2014 - 12:54 | 4691127 ArkansasAngie
ArkansasAngie's picture

A bank will not loan you money to buy a COndo in Arkansas.  So ... what condo sales there are here in Arkansas probably are not showing up as loan orginations.

Who would want a condo?

Thu, 04/24/2014 - 12:55 | 4691135 Divided States ...
Divided States of America's picture

Try to find out what nationality those buyers are? I am sure its dirty money going being used. Its leaving Russia and China because something big is about to happen.

Thu, 04/24/2014 - 12:59 | 4691155 NotApplicable
NotApplicable's picture

All of that hot money has to go somewhere!

Thu, 04/24/2014 - 13:06 | 4691185 James_Cole
Thu, 04/24/2014 - 13:20 | 4691244 linniepar
linniepar's picture

BLM on a spending spree?

Thu, 04/24/2014 - 13:30 | 4691301 ndotken
ndotken's picture

I'm a Florida resident and what we're seeing are people converting their IRA's into Real Estate IRA's and using them to pay cash for rental propoerties ... including beach condos.  It's one of the few ways investors can save for retirement without being raped by the blood-sucking leeches on Wall St.  Unfortunately they have bid up the prices to levels where there is absolutely zero cash on cash return after paying rental commissions, condo fees, taxes and operating expenses.

Thu, 04/24/2014 - 13:32 | 4691337 Son of Loki
Son of Loki's picture

Do they convert their Yuan or Rubles to dollars first or simply hand over a suitcase of their own [hard-worked-for and very-legally-obtained] currency.

Thu, 04/24/2014 - 14:32 | 4691782 redpill
redpill's picture

There are a lot of cash purchases, however in their calculation they are excluding the Unknowns, so they are assuming if it's unknown it has the same ratio of cash and mortgage as the Knowns.  Share of the total including unknowns is more like 60%, but still it is massive.

Looks like peak for Florida Feb '13, 85%!

Over half are in Miami alone.

Thu, 04/24/2014 - 14:34 | 4691789 Herd Redirectio...
Herd Redirection Committee's picture

This is what loss of world reserve currency, phase I, looks like...

Thu, 04/24/2014 - 15:57 | 4692222 Stuck on Zero
Stuck on Zero's picture

My wife was unable to get a loan to by a condo.  She tried everything and kept getting turned down.  Finally her bank said: "Why get a loan?  You've got a $120K line of credit with your account."  She took the line of credit at 3.5% and purchased the condo with the cash. Nuff said.

 

Thu, 04/24/2014 - 13:01 | 4691165 thamnosma
thamnosma's picture

Not sure why they would take their money and move it to the USA, especially Miami.  I think "something big" will more likely be there.

Thu, 04/24/2014 - 13:09 | 4691195 max2205
max2205's picture

10'000 boomers retire per day now. 

Most want NO house payment so they can live on cash once Barry steals soc sec

 

That's a lot of condos!

Thu, 04/24/2014 - 12:58 | 4691152 Pladizow
Pladizow's picture

How will rising interest rates effect a market that is 80% cash?

Perhaps when rates are far higher, then there will be an opportunity cost - but not initially.

As rates start to rise, those who require a mortgage and have been waiting, will finally act in fear of much higher rates and this will push prices higher!

 

Thu, 04/24/2014 - 13:00 | 4691160 NotApplicable
NotApplicable's picture

I don't think there's enough of those type of people left to matter.

Thu, 04/24/2014 - 13:04 | 4691178 Divided States ...
Divided States of America's picture

Yup, but there are tons of ppl who need to refi at much higher rates...and cant afford to. BUT there are quite a lot of those who bought their place to rent out whom will be cash flow negative as higher rates and higher maintenance, property taxes, etc...and will be scrambling to dump their places at all cost. its like thousand of people in a theatre rushing to the exits but there is only two exits.

Thu, 04/24/2014 - 13:14 | 4691209 Seer
Seer's picture

I agree with all but rising property taxes.  My reasoning has always been that as properties become increasingly under the control of fewer wealthy hands that those wealthy hands will apply pressure to local municipalities to hold down/lower property taxes.  I'm talking longer-term here... (though I've already seen it first-hand, for myself)

Thu, 04/24/2014 - 14:49 | 4691891 Lord Koos
Lord Koos's picture

Sure -- why would investors want to vote yes on school levies or fire station bonds.

Thu, 04/24/2014 - 13:43 | 4691430 _ConanTheLibert...
_ConanTheLibertarian_'s picture

"scrambling to dump their places at all cost"

Shouldn't that drive prices down? You know, supply and demand.

Thu, 04/24/2014 - 13:46 | 4691450 Divided States ...
Divided States of America's picture

Thats my point, prices will Crap

Thu, 04/24/2014 - 13:48 | 4691461 daveO
daveO's picture

Yield seekers. Low rates are pushing savers into RE market. People never learn they're being herded like sheep. You still have to have good paying job for a mortgage. 

Thu, 04/24/2014 - 14:09 | 4691624 Spitzer
Spitzer's picture

It's the "anything but gold" trade

Thu, 04/24/2014 - 12:56 | 4691129 dryam
dryam's picture

I would love to see who exactly these cash buyers are, and if the Fed is directly buying.  They printed USD's in exchange for confiscated gold in 1933 as a way to devalue the dollar & extract wealth from the people.  Are houses the new (semi)hard currency for the Fed?

Thu, 04/24/2014 - 13:07 | 4691190 monkeyshine
monkeyshine's picture

I'm sure some of them are pure investments from those with the cash on hand and desire to rent it or flip it down the road.  But dont forget .guv have it much much harder to qualify for a loan full stop.  I bought a condo at the end of 2012 (yes, a second home, but its for my folks to live in) and none of us could qualify for a loan even though I had 50% deposit and had plenty of extra money to make the payments each month.  So, I took a hard money loan at 6.99% for 3 years interest only.  Usury yes but I saw it as I had little  choice I needed to move them and this was the place they wanted and the time they needed to move so it was either that or they were moving in with me.  This was thus recorded as a "cash" purchase and this loan appears nowhere on my public records.  In 18 months I will need to refi or re-borrow hard money or make the other 50% to pay it off.

Thu, 04/24/2014 - 13:17 | 4691224 Seer
Seer's picture

Thanks for sharing your story/info.  It demonstrates that there's always a lot more going on than most are aware of.

Thu, 04/24/2014 - 13:49 | 4691472 daveO
daveO's picture

Blackstone, etc. are the conduits.

Thu, 04/24/2014 - 12:56 | 4691140 jbvtme
jbvtme's picture

sis in beantown says chinese are buying all the units (cash) in her building and renting them. i estimate a 4% return.

Thu, 04/24/2014 - 18:54 | 4692876 Raging Debate
Raging Debate's picture

Jbvtme - I was born in Boston. Love it but damn has property soared the last twenty years!

I am in SW Florida. I am cash RE investor. I couldn't think I could make margin in Miami but I can here and it's about 6% on small home rentals. As Flintstone commentator put at the top condos fees are out of control.

As to why RE (and gold), there is nothing else to invest in right now and RE is tax shelter. That taxman is getting real hungry these days. I will look at stocks again in 2016. Right now way overpriced and I don't have a lot of time for diligence to invest in small caps.

Plus, they are a little out of town so if geopolitical shit happens, or revolt here what not they are safer investments than paper. But I am mot going to live my life in fear, even the worst of times end. While I dont think there will be an all out nuclear war but even one going off anywhere or EMP would crush stocks overnight.

Thu, 04/24/2014 - 13:16 | 4691221 NEOSERF
NEOSERF's picture

Get ready to get bent over broke boomers...your new landlo will be like your old landlo...Big money

Thu, 04/24/2014 - 12:51 | 4691103 Grande Tetons
Grande Tetons's picture

Not sure....I think many are just unloading fiat....avoiding the vat or tax man.....avoiding being Cyprussed...... 

Let us not forget...most of these cash purchases are not for shitholes either. 

For example, the RE market tanks and bank seizures occur at the same time....hmmmm....at least I got this sweet pad. 

Thu, 04/24/2014 - 13:14 | 4691170 TruthInSunshine
TruthInSunshine's picture

A lot of these, though by no means all, are detached, so they are more or less homes (with admittedly high HOA fees, especially in states such as Florida).

There are two main functions at play leading to this unprecedented extremely high % of all cash purchases:

1) Those retiring or retired are downsizing, and many of these people have a) positive equity in larger, existing homes, and/or b) are of the demographic group and select few (as a % of Americans overall) who have actually managed to save significant liquid wealth.

These people want to live in warmer climates and/or just downsize to a smaller, nice, less maintenance intense place, and have the resources to do it, AND SINCE THEY ARE ONLY GETTING LESS THAN 1% INTEREST ON SAVINGS, they figure why not pay cash for their LAST RESIDENCE (since even at a low 4.5% mortgage rate, the difference between what they're being paid on savings and what they're paying to borrow is approximately 400%)? Most of these people aren,t
viewing the purchase as an investment, but as a place to live the golden years and die in.

2) On the lower to mid end, funds are still paying cash from pooled funds (from dumb investment/institutional money), for speculative purchases, and they don't need or want to go through mortgage approval process in an attempt to beat the clock and purchase and flip (or rent) units - money of this form being pumped into speculative RE at this late stage of the RE bubble v2.0 will be vaporized (but the fund managers will be handsomely compensated nonetheless).

Thu, 04/24/2014 - 21:05 | 4693413 Ellesmere
Ellesmere's picture

Good comment ...thanks.

One question: why are the condo fees so high in Florida and how can the market sustain that?

Thu, 04/24/2014 - 12:50 | 4691105 Skateboarder
Skateboarder's picture

Is it individuals/families buying these things, or LLC/Corps?

Thu, 04/24/2014 - 12:50 | 4691111 AdrenalineTrade
AdrenalineTrade's picture

Flippers gon' get hurt real bad.  Fo sho.

Thu, 04/24/2014 - 12:57 | 4691151 buzzsaw99
buzzsaw99's picture

you shouldn't talk about blackstone like that. [/sarc]

Thu, 04/24/2014 - 12:51 | 4691115 buzzsaw99
buzzsaw99's picture

suspect that in many cases "all cash" means not financed with traditional mortgage but rather via large scale corporate borrowing as alluded

Thu, 04/24/2014 - 12:51 | 4691116 JimRogers
JimRogers's picture

Bernanke starts tightening?

Thu, 04/24/2014 - 12:53 | 4691117 Zirpedge
Zirpedge's picture

This "cash" is actually just a computer entry in an account that has access to ZIRP fundage. I doubt they are actually exchanging printed currency. Witness the rising tide lifting all boats.

Thu, 04/24/2014 - 20:55 | 4693393 Ellesmere
Ellesmere's picture

That's what comes to my mind.

Thu, 04/24/2014 - 12:51 | 4691118 Seasmoke
Seasmoke's picture

So steal the taxpayers houses in numerous criminal ways. Then pay cash in full with the made up out of air fiat money. C'mon this sounds like WAR !!!!

Thu, 04/24/2014 - 13:20 | 4691250 Seer
Seer's picture

Catherine Austin Fitts laid this scheme bare, though it was back a couple of decades ago (same mechanisms though).

Thu, 04/24/2014 - 13:23 | 4691271 hangemhigh77
hangemhigh77's picture

The banksters have been doing this for 2000 years.  This is actually their business plan.  The last time it got this far was 1776, then ooops, it blew up in their face.

Thu, 04/24/2014 - 15:24 | 4692059 Incubus
Incubus's picture

Revolutionary Men wore wings in those days, and had massive legs, for carrying around their elephant balls.

 

 

Thu, 04/24/2014 - 12:52 | 4691122 cougar_w
cougar_w's picture

Hot money from China.

Collision course. Fasten your seatbelts.

Thu, 04/24/2014 - 12:57 | 4691139 Kirk2NCC1701
Kirk2NCC1701's picture

Hot fiats from NY.  Vroom, vroom.

[cue song] If you can fake it there, you can fake it any-where...

Thu, 04/24/2014 - 12:56 | 4691141 Kreditanstalt
Kreditanstalt's picture

Don't tell me: "there's no price inflation anywhere"...right?

Thu, 04/24/2014 - 12:56 | 4691144 youngman
youngman's picture

I bet 50% of it is foreign investment..the other is the 1%ers here....when you have that much money you have to put it somewhere...lots of Homes in Aspen just sit there all year long vacant...its just a notch onthe belt and a money dump for the wealthy....they can say they have a house in Aspen..but never go there...its cocktail talk in the Hamptons

Thu, 04/24/2014 - 13:03 | 4691159 Grande Tetons
Grande Tetons's picture

Exactly, and the money they used to keep in the bank or short term paper is giving them shit.  That, and who the fuck trusts their money at a bank anymore? 

Thu, 04/24/2014 - 13:23 | 4691269 mccvilb
mccvilb's picture

Back when he was running for POTUS, when asked, McCain couldn't remember how many houses he owned. Had to be told it was six, probably because it was more like twenty-six with the majority buried in blind trusts ala Teddy Kennedy (Kennedy played dumb about his ownership via a blind trust of DC office buildings leased to the Social Security Admin.).

Thu, 04/24/2014 - 19:51 | 4693159 Singelguy
Singelguy's picture

I think you are right. Purchasing real estate in the USA is the only easy way for foreigners to launder their money. I think the number could be higher than 50%

Thu, 04/24/2014 - 12:57 | 4691148 Dagny Taggart
Dagny Taggart's picture

On the "flip" side, it would be most interesting to know how many smaller, rural properties in undisclosed locations are being bought with cash. We'll never know.

Thu, 04/24/2014 - 12:57 | 4691149 Old Man River
Old Man River's picture

?????

Thu, 04/24/2014 - 12:57 | 4691150 hankwil74
hankwil74's picture

The crash won't be worse because the banks won't be left holding the bag because and thus "in need" of a bailout.  Instead, all of these people that outright own the home will simply see it go down in value.  There won't be as many people unable to move or to refi because they are (sometimes drastically) underwater on their mortgage.  If all of these people from China and Brazil are "parking their money" in U.S. real estate, what makes anyone think that they'll try to liquidate when shit hits the fan and the worldwide equities markets begin tanking?

Thu, 04/24/2014 - 13:04 | 4691182 thamnosma
thamnosma's picture

You're right, everything is okay.

Thu, 04/24/2014 - 13:20 | 4691252 hangemhigh77
hangemhigh77's picture

Of course the banks will need bailouts.  As the value of real estate crashes their holdings crash couled with CDO's and all the deriviatives they are levered 100 to one or more.  The banks will go up in flames first.

Thu, 04/24/2014 - 13:26 | 4691292 Seer
Seer's picture

I'm not thinking that the upside-down situation is going to improve, and, given that things tend to progress in only one of two directions -forward or backward- I'm thinking that things are leaning towards backwards, decline- folks struggling even more with mortgages, and on top of that property taxes (which can go either way, but they carry weight).  This all leads to repos, which then has to hit the market at some point, only there will be less available buyers as time goes along.  So...

No, the current owners may not instigate the sales, but that doesn't mean that sales won't happen...

Thu, 04/24/2014 - 14:12 | 4691648 MachoMan
MachoMan's picture

Of course, as your investment goes down in value (if priced in terms of how much rent you can receive, due to stagnant to declining wages; it probably won't go down in value due to comps since there aren't any/shadow inventory), the "risk free" rate of return will probably be decreasing as well.  It would be great to be in cash and time the crash perfectly and have that appreciated cash buy up all the depreciated properties, but timing decisions are fools' errands.  At some point, the levee breaks and rates rise and everything goes to shit...  however, even if that happens, I'll take a deed over an FDIC promise any day of the week.

You could look at this like a cash buying frenzy for the uber wealthy...  or, it could be part of the broader effect of cost push inflation and expectation of a currency crisis.  It should be fairly alarming that no one is choosing to borrow.  Which to me says interest rates are going nowhere but down for the near to mid term.  What is the necessary interest rate to entice anyone to borrow?  2%?  -2%?  -20%? 

PS, all we're going to do is head back to the era of land sale contracts...

Thu, 04/24/2014 - 13:03 | 4691172 lemarche
lemarche's picture

MONEY FROM THE FED FREE PRINTING GOES DIRECTLY INTO THE STOCK MARKET FOR THE 0.1%ERS AND THEN INTO REAL ESTATE... WHAT HAPPENS WHEN THE FED CAN NO LONGER MAKE THE INFLATING OF BUBBLES ITS MAIN POLICY??..

Thu, 04/24/2014 - 13:03 | 4691173 PlusTic
PlusTic's picture

All cash = Private Equity...it aint john q. public who used to work at the  extinct plant

Thu, 04/24/2014 - 13:03 | 4691174 thamnosma
thamnosma's picture

It's reassuring to know Americans are so flush with cash.   Everything must be okay.  Recovery underway. 

Thu, 04/24/2014 - 13:07 | 4691186 Bosch
Bosch's picture

A lot of our clients, (granted this is probably a small subsect of the total number), have said eff the banks and are just paying cash for homes because it is considerably less of a headache.   

Mortgaging a home was just something you always did whether you needed to borrow funds for it or not, no longer. 

 

Thu, 04/24/2014 - 13:32 | 4691331 Seer
Seer's picture

"Mortgaging a home was just something you always did whether you needed to borrow funds for it or not, no longer. "

And if there's a debt jubilee then you miss out on the benefits of debt-forgiveness (your cash is gone).  Please note that this is not the same as intending to skip paying your mortgage: I plan on upholding my end of the contract.

Consider that it might be more beneficial to take advantage of low interest rates to help buy a home and to utilize your cash for other things that are more likely to give a better return.

Thu, 04/24/2014 - 14:19 | 4691695 MachoMan
MachoMan's picture

Why not go elbow deep and leverage yourself to the gills then?  I think the biggest risk at the moment is the possibility of a long downturn/depression rather than a quick hyperinflation.  If so, that debt is going to be a noose.

Thu, 04/24/2014 - 13:09 | 4691194 Yen Cross
Yen Cross's picture

     This shit reminds me so much of the Japanese in the late 80's and 90's buying everything that wasn't nailed down, and then getting hari-karied a few years later... I'll bet they still have shit on their books that's likely been rolled into the latest Abedumbics package.

Thu, 04/24/2014 - 13:29 | 4691305 krispkritter
krispkritter's picture

I was traveling out there in the 90's for work and visiting relatives.  Some of the people working out there were trying to emulate the Japanese and buy investments to rent/flip, thinking the market was going to the moon.  Some, like my relatives, bought their's early and a couple to flip at the top.  Anyone I remember who bought to ride the Japanese tsunami had their asses handed to them. I remember visiting a relative in Pasadena that was renting a house and detached 1 car that was almost identical to mine in St. Pete, right down to flooring and condition.  The owner listed it and the bidding was over $250k when she moved out.  Mine was purchased for $46k. I really started to crack open my mind to what was happening in RE and the markets then.  

Thu, 04/24/2014 - 13:40 | 4691408 Seer
Seer's picture

I was fortunate in that I sold toward the top of the bubble.  Back then it was more or less that I smelled something brewing; now I know what it was that I smelled.  At the end of 2010, after renting for 5 years or so, I bought (Ag land this time): rates low; property was a distress sale (renter and not owner living there, so owner wasn't forced to move).

Kenny Rogers' "Gambler" provides some basic guidance on all this:

http://www.youtube.com/watch?v=Jj4nJ1YEAp4

Thu, 04/24/2014 - 13:10 | 4691200 _SILENCER
_SILENCER's picture

Well, it's my guess this isn't from people that actually work, you know, the old school discipline of exchanging time and labor for financial compensation which is then to be surrendered to Government. You know, Fuedalism.

My bet a lot of this is from NYC skyscraper epople washing their insider crime money. Dope money. Weapons trade.

Thu, 04/24/2014 - 13:14 | 4691215 Winston Churchill
Winston Churchill's picture

I was talking to a new client recently.He just sold his
financial advisor software company recently for about $250mil.
He just moved up the housing ladder, and is keeping his old
house 'cause it will be worth more next year.
Just can't make this shit up. He may know a lot about
software , but financial advice......

Thu, 04/24/2014 - 14:54 | 4691922 Seer
Seer's picture

New client?  Easy money?

Thu, 04/24/2014 - 13:16 | 4691218 hangemhigh77
hangemhigh77's picture

What about yacht sales?  That's an industry that everyone is very concerned about.  I mean when the whole world crashes and billions are starving the one thing you want to print money for to prop up other than criminal banks are yacht building companies.  Otherwise where will Jamie Dimon go to drink champagne and eat caviar on toast points?  These are the basics if you're the Fed Chief.

Thu, 04/24/2014 - 13:17 | 4691228 thunderchief
thunderchief's picture

Oh for Christ sake. Not another reason to start WWIII.
Sheesh!

Thu, 04/24/2014 - 13:19 | 4691233 Ban KKiller
Ban KKiller's picture

I, like others, am not "stunned" by this. I expect this in todays fascist country. I would be stunned if my chickens spoke to me in Spanish but...I would expect to still steal their eggs. 

The last paragraph says it all. Stack lead and death to the FED. Yeah..yeah...NSA is mad because Snowden has released ALL of his work to key people....

Thu, 04/24/2014 - 13:20 | 4691249 krispkritter
krispkritter's picture

Friend with a title business sees this constantly here in FL.  They even have a guy who basically works in-house doing cash buys of distressed properties and flipping them.  Supposedly he's doing more business than pre-2k8.  Any properties out this way are basically cash sales as most are 'bargains' at this point.  Place up the road had a $150k mortgage on it in '10 sold for $58k cash a month ago.  Land that was upwards of $35k an acre is going for $7k and everyone is buying outright because it's 'cheap'(back to 2001 levels). 

Thu, 04/24/2014 - 13:23 | 4691276 time2blowitup
time2blowitup's picture

Your thesis is wrong..RE may crash, but not likely and not for the reasons you state. These investors won't flee when rates go up. They aren't leveraged, enjoy tax benefits vs. other assets, and rental rates are steadily increasing nationwide. Here's a fun fact tho: median home prices relative real disposable income have eclipsed '07 peak. 

Thu, 04/24/2014 - 13:36 | 4691377 Tyler Durden
Tyler Durden's picture

Of course they are leveraged: the money used to fund house purchases comes courtesy of other collateral - collateral which will have its value crushed once money is less easy, leading to spillover effects everywhere

Thu, 04/24/2014 - 14:01 | 4691563 time2blowitup
time2blowitup's picture

I disagree.  Cash investors are using real cash not collatarlized loans.  These investors have solid balance sheets.  The pain / spillover will start in the subprime market and the home owners who are truly leveraged just like '08.  But doubt any of this will be an immediate concern as the fed won't stop printing or manipulating rates anytime soon.

Thu, 04/24/2014 - 14:26 | 4691741 Tyler Durden
Tyler Durden's picture

Perhaps it is worth reviewing that all cash is debt from someone in exchange for some collateral, either tangible or intangible

Thu, 04/24/2014 - 15:21 | 4692050 Toolshed
Toolshed's picture

Wow. That mindset that real estate is a foolproof gold mine appears to be impossible for some people to shake off. Investors crowing about how great their rental revenue stream is will be singing an altogether different tune when their tenants lose their jobs and they are forced to evict them at great expense and end up with a rental unit that is trashed and the necessary rehab eliminates a year, or more of profits, with little prospect of securing another tenant at a profitable rate. Humans are predisposed, in most cases, to view their world through an overly optimistic lens. Books have been written on this topic. Apparently, there are those among us who would benefit from picking up a copy.

http://www.amazon.com/Optimism-Bias-Tali-Sharot-ebook/dp/B004J4WNDA/ref=...

Read it.

Thu, 04/24/2014 - 18:42 | 4692863 Cthonic
Cthonic's picture

there really isn't any mechanism to track cash, is there? kinda like that, keeps people guessing ;)

tyler's previously pointed out the original private equity wave of buy to rent, and i see a lot of older folks reaching for yield by privately financing these sorts of 'all cash' transactions as well. however, some of the hottest money is no doubt from overseas.  dollar repatriation is a bitch.

https://iiusa.org/blog/government-affairs/dept-state-statistics-eb5-visa...

Thu, 04/24/2014 - 15:00 | 4691943 Seer
Seer's picture

"The pain / spillover will start in the subprime market and the home owners who are truly leveraged just like '08."

Really?  You can predict that?  Based on what?

How can it be all-cash AND subprime?  Has there been a lot of new subprime?  I'm probably overlooking something here, so please elaborate.

Thu, 04/24/2014 - 15:16 | 4692019 Seer
Seer's picture

"money used to fund house purchases comes courtesy of other collateral"

-> opportunity cost <-

Thu, 04/24/2014 - 13:36 | 4691369 forwardho
forwardho's picture

On site report from sunny Miami.

In 2009 there were over 36.000 high end condos which were blacklisted in Miami. No bank would lend when the "value" of propertys could not be assertained due to crashing demand. Liquid investors were buying  blocks of 10 - 100. The buildings are now owned, but not rented. Entirely vacant buildings sit unused today. Someone is going to take a bath when this fantasy can no loger be maintained. Since the propertys were listed as AAA rated assets, and were purchased for that use only, G-d only knows what the blowback will be.

 

Thu, 04/24/2014 - 15:01 | 4691953 Seer
Seer's picture

"In 2009 there were over 36.000"

Hmm... you ain't [originally] from around these parts, are you? (folks in the US use commas to deliniate thousands)

Thu, 04/24/2014 - 13:46 | 4691449 I Write Code
I Write Code's picture

I wonder if there isn't some glitch in the process and some forms of mortgage are getting improperly reported as cash.

I worked for a company like Corelogic and I wouldn't trust their data if it reported the sky was blue.  When the data reported an anomaly, at least half the time it was a problem with the process.

Thu, 04/24/2014 - 13:54 | 4691513 nakki
nakki's picture

Alabama? Did anybody else find it interesting that Alabama was number 4 on the list? Can Chinese people even pronounce Alabama? Maybe its the Russians, you know because its next to Georgia. 

Thu, 04/24/2014 - 13:55 | 4691519 rpboxster
rpboxster's picture

What's the $ value of these transactions? and how many units are we talking about?  I'm not sure it represents boomers selling their primary residence and downsizing or the existing home sales/inventory levels would not be as bad as they are.  Also, aren't most of the forclosures in these top states (comprising primarily condos)?  Most auctions require cash payment, so that'd explain it.  I believe it is mostly people with extra cash, not 1%'s, but regular folks, hoping to buy rentals units.  They are just late to the party, as usual.  Several people in my circles are looking all cash purchases to flip/rent.

Thu, 04/24/2014 - 14:20 | 4691700 Latitude25
Latitude25's picture

I bought one 2 years ago in West Palm Beach for $14,000 cash.  It cost me $6000 in renovations and is now rented for $450/month.

Thu, 04/24/2014 - 14:41 | 4691839 garyw
garyw's picture

I understand why Florida and New York condos are being paid for with cash. It is because Fema is no longer subsidising flood insurance. Large cash posessing corporations are going to sweep up beachfront property and pay cash so they can avoid Banks making them like the rest of us pay flood insurance without subsidies. They are making their last move accumulating properties before the people take over but what they do not realize is we will take the property back later anyway. They will not prosper from it. Can't speak for Nevada.Water is going the other way there.

Thu, 04/24/2014 - 15:00 | 4691947 AdvanceDecline
AdvanceDecline's picture

I bought an investment condo late last year for cash last year in NYC.  The after-tax cap rate was a little over 4%.  So why did I do that?  First I had the cash and I didn't like the stock market after such a good run last year.  Second, the yield was better than cash and combined with depreciation deduction benefits, it seemed appealing for my overall tax picture.  Third, I'm in my early 50's and plan to sell my house and retire in the next 10 years and downsize.  In fact, I would think that a lot of people in the baby boom generation like me are in my shoes. namely those that survived the turmoil of the stock market in 1987, 2000 and 2008.  Yes, my generation has seen a few bubbles and busts!  In addition to having your health, a great spouse, and good kids, there is no sense of security better than knowing that you own a place to live free and clear when you start slowing down.  In fact, the deal is working out so well since the place has already appreciated about 10% that I am refinancing my house, taking out a bigger mortgage and buying another investment property for cash.  After all, I will be selling my house in a few years anyway, why not cash out and use the equity for something that is more easily rentable in the city that will give me an annuity stream when I retire.  Plus it's damn fun when a desireable property has multiple bids, and you offer all cash below the bids and the seller's eyes light up and take your cash bid!  Additionally, after the places are rented, I can mortgage those properties if I want and/or set up helocs for instant big check writing ability.  You young guys keep shooting for returns on paper.  I prefer having a big wad of unencumbered real assets and cash to do whatever I damn well want to do!  When you get older, you'll understand.  Just saying.

Thu, 04/24/2014 - 15:11 | 4691991 Toolshed
Toolshed's picture

I guess that puts you in the "housing prices never go down" camp. Good luck with that.

Thu, 04/24/2014 - 17:11 | 4691999 Seer
Seer's picture

"I prefer having a big wad of unencumbered real assets and cash to do whatever I damn well want to do!  When you get older, you'll understand.  Just saying."

Yes, I do.  That's why I'm not really doing any of it! </partial sarc>

Had "retirement" all mapped out in another life.  Since I gave up that notion my life has improved dramatically.  Now I have Ag land, where I would wish to be buried when I die.  At some point the music will stop and your choice of chairs will be severely limited, if even you have one available to sit on.  I have beauty all around me (esp my wife)- I wait not for some "grand plan" to materialize, I am living as though every day is a holiday NOW (mentally... my body gets to experienced the opposite, but that's what it's supposed to do- physical labor, and when you get older it's the only way to check arthritis).

If it isn't one thing it's the other.  Pick your poison.  Keep in mind that stress can be a killer (early terminator of "retirement plans").

Thu, 04/24/2014 - 15:17 | 4692026 Rican
Rican's picture

We're all renters now!

Thu, 04/24/2014 - 15:39 | 4692140 Incubus
Incubus's picture

to be honest, I'd rather live in a really nice vehicle than piss away money on rent.

Thu, 04/24/2014 - 16:39 | 4692183 Seer
Seer's picture

A house/home IS a vehicle, of sorts.   What matters is LOCATION.  I'm pretty sure that you know of places where you and your "really nice vehicle" wouldn't eactly be anywhere you would want to be...

Thu, 04/24/2014 - 21:21 | 4693405 deflator
deflator's picture

 You are paying rent regardless if you factor in things renters do not have to pay like property taxes, homeowners insurance, maintenance, depreciation, fraud if there is a homeowners association. You can move anytime you want if some fucked up neighbors move in next to you.

 The only way that you can say that you are pissing money away on rent is if you have an expectation of rising home prices above those expenditures on a long enough timeline.

 The, "pissing money away on rent" meme or more appropriate, 'delusion' has taken hold on a fairly short timeline.

 

 What fucked up all the good things about home ownership was government guaranteeing homeownership to everyone that was living in a government housing project. 'whats up with deezz laminate countertops and white appliances"? "I said I wanted stainless steel and granite bitchezzz!" "Can I getz a new realz estate bbbroker"?

Thu, 04/24/2014 - 17:59 | 4692687 deflator
deflator's picture

 A lot of condominiums are cash only because banks do not want to make loans for condos. Many condominium home owner associations are negligent in maintaining their properties.

 HOA's are able to be negligent in maintaining their properties because there is no oversight of HOA's in many States.  HOA's don't even have to mainain records or any kind of accountability for expenditures of home owner assessments. Typically the property manager and the HOA board of directors collude with contractors to charge top dollar for shoddy patch jobs and split the difference.

Fri, 04/25/2014 - 12:13 | 4695601 honestann
honestann's picture

These cash purchasers are going to be VERY sorry come late 2014 and beyond.  The predators-that-be have destroyed the entire world economy.  Every action they take makes the economy less and less efficient, and leaves less and less money for regular folks to buy things.

This has made selling $250,000 tourbillon watches and other "for rich only" luxury items easier, as the 1% receive large benefits from the manipulation.  But the fundamental fact is, the vast majority of individuals have considerably less money to spend, especially after increasingly bloated taxes and healthcare.

Which means the obvious.  Less to spend.  Period.  End of story.  And so, the price of houses will have to fall... to sell at all.  Another important trend to watch is... the tendency to homes to become residences to multiple generations of a family.  This is the obvious, and sometimes the only way to avoid abject poverty in a world where the predators utterly dominate and manipulate everything in order to misdirect all wealth into their pockets, with zero concern for longer-term consequences.

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