Posted on 08/29/2013 6:48:49 AM PDT by KeyLargo
Edited on 08/29/2013 6:53:23 AM PDT by Admin Moderator. [history]
“Who is it that has enough cash to buy a home?”
Investors...
Wall Street has been throwing a ton of money at REITs buying Repos for about a year now
West Coast higher-priced areas... mostly Chinese coming here with cash (The good ol’ People’s Republic may soon run out of Commie Party Officials and Factory Managers?). West Coast, lower-priced areas ... mostly a few large investment banks buying to turn them into rentals (but this buying appears to be slowing greatly).
Sustainable?
I don’t know about the Chinese, China is a big country so as long as they allow (or encourage?) their rich to take their money and leave....?
The rental model turns out to have greater operating costs and difficulties than some of the investment bankers may have considered. (And if they bid up prices in an area, they may not always be able to increase rents to match...)
We will see...
The big boys don't make stupid bets often... not the 'early betters'...and that's what's happening. They're seeing a different world than the one we're living in right now.
In my view, the gusher of credit has to result in massive inflation eventually. What surprises me is that it is taking so long.
Why Are Hedge Funds Buying All the Real Estate in CA?
What does it mean for the wholesalers, fixer-uppers and buy & hold investors?
Not only are the hedge funds buying CA real estate, but also the foreign investors, particularly, the Chinese, are gobbling up all the SRFs they can get their hands on. Money is no object and neither is the negative cash flow. It appears they know something we don’t or is it possible they are making a mistake? Or, could this be another scheme to make billions of dollars at the expense of the middle class by manipulating the market, much like what happened in 2008?
http://samsrealestateclub.com/why-are-hedge-funds-buying-all-the-real-estate-in-ca
The South Florida bubble is now officially reinflated. The Florida Association of Realtors reports that during the first quarter of 2013, sales of single-family homes in Miami were up 10.3 percent, with prices up 23 percent, compared to the same period in 2012. But the first hint that something strange is going on is the unusual preponderance of cash deals. About 45 percent of the single-family home sales and 77 percent of condo sales were made in all cash.
As highlighted by a recent story in the Washington Post, a major factor behind both the cash deals and the boom in general is the growing presence of institutional investors. Generally loathe to load up on a volatile, illiquid and generally low-margin asset class like residential real estate, hedge funds and other big money investors have seen lots of opportunity in the wreckage of the sand state housing busts. Analysts told the Post that institutional investors now account for as much as 70 percent of sales in some Florida markets.
http://www.insurancejournal.com/blogs/right-street/2013/06/13/295481.htm
“The airwaves are full of stories of economic recovery. One trumpeted recently has been the rapid recovery in housing, at least as measured in prices.
The problem is, a good portion of the rebound in house prices in many markets has less to do with renewed optimism, new jobs, and rising wages, and more to do with big money investors fueled by the ultra-cheap money policies of the Fed.”
In my neighborhood in LA almost all sales are all cash. In fact, at the time of the open house, there will usually be multiple offers of all cash.
If you like a house, you must act immediately. It will be gone almost immediately after the sign goes up. I bought mine before the sign went up and did a 2 week escrow.
A kid here in the office, right out of college just paid all cash for his first townhouse! Eek!
I'm surprised they're able to kick that one into the future as long as they have too.
Where did he get the cash?
My observations from some recent relocations are as follows:
Some markets like Vegas and the Phoenix Valley had such a market fall, from artifically high to bust, that hedge-fund guys, with cash they wanted out of stocks, came in and bought up houses.
Some older folks, around the various markets in the nation, took money out of retirement accounts and paid off mortgages so job issues couldn’t cost them their homes.
What happens then is those folks buy down sized for all cash.
The other end is that there are a corresponding large number of 3% FHA buyers. They don’t have to do the 15% down for conventional finacing which with the “full docs” requirements is terrible now, and they are buying at 3% down for simplicity.
We also see finacial institution holding back foreclosure sales. They know flooding the market will only cost them in the end, so those houses sit empty or are rented.
Some markets like Phoenix or Vegas you can rent what was a 300k home with a pool of 2000 to 2600 SF for 1200 to 1500 a month — unheard of a few years ago.
Just owners waiting for “the market to come back.”
I thought “cash” meant no borrowing.
I understand selling property currently own and buying with cash, we could do that but not replace in kind. We could sell our land/house and buy in town somewhere but I don’t want to live in town. I’m interesting in buying property in town but it won’t be where we live.
What I’m trying to say is we will always have a base in the country.
I didn’t ask him. But I’ve seen it around her often enough to think the parents gave them an head start on their inheritance.
True. That is exactly what they are doing to Cobb county with the dregs from Atlanta.
We have friends who live in a prosperous neighborhood in the L.A. area who have noticed many very large, elaborate homes which are seemingly vacant. Less elaborate homes were torn down to build these. The apparent owners are Asian foreigners.
That's nearly identical to the rate at which L.A. properties were going up around 2006 when my daughter bought a condo there. That rate continued for two years at which time I noticed a lot of people talking down the real estate market.
My daughter was fortunate enough to sell at the peak but it was a real squeaker. The first potential buyer met her price but the deal fell through. The second got a ten grand discount and closed the deal.
If properties are already inflating at what was the peak rate during the prior boom, I would be extremely wary.
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