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 SoberOne
SoberOne'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%

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