Bizzle wondered about the all-cash buyers.
Did they cash out at the top, and have been patiently bubble-sitting? Out-of-towners? Generational money shift (inheritance, before or after death)? or move-up or down?
In the previous post, some of the examples were marked as cash buyers by the listing agent, but their tax rolls haven’t been updated yet (Rancho Costero, Via Conquistador, Valerio Trail, and Lynwood).
But we can check out the others, and add a few that weren’t previously sold at the peak.
OUT-OF-TOWNERS (2) The buyers of Camino del Orchidia and Meadows Del Mar showed no previous history owning or selling in San Diego County, so let’s assume that they are out-of-towners (not first-timers).
MOVE-DOWNERS (1) The buyers who paid $1,130,000 for Skyline moved from Solana Beach. They had paid $1,300,000 for a house on the east-side of Pacific in 2000, and sold it last month for $2,100,000, using the same agent from Skyline – nice package deal. Their loan was around $800,000, so they transferred their equity to Carlsbad and were able to lose the payment.
Here are other homes purchased recently by all-cash buyers:
782 Sparta, Encinitas, 92024
5 br/4.5 ba 3,454 sf
YB: 2002
Monthly fees = $261
SP: $910,000Â 9/02 new
SP: $1,435,000Â 6/09
MT: 178 days
One-story former model home on 3/4-acre lot in Leucadia. These all-cash buyers are long-time owners of a smaller house in Mission Hills that isn’t on the market, and wasn’t refinanced. They used the Mission Hills address on the tax roll, so they must be planning on keeping it. Flippers? No way, we’ll call this one:
GENERATIONAL (1) ………(buying a house for parents or kids?)
*********************************************************************
5258 Greenwillow, San Diego 92130
5 br/5 ba, 3,496sf
YB: 1999
Monthly fees = $133
SP: $751,000Â 7/98 new
SP: $1,325,000Â 6/09
MT: 87 days
These sellers had listed for $1.595 million and came down pretty quick, so their $1.2 loan might have been a motivator. The cash buyer has a Scottsdale address, and it looks to be in the Troon area, so he has/had some dough. Buyers don’t always put their future address on their tax questionaire, so we’re not sure if this is an out-of-towner coming to join us permanently, or a
SECOND HOME (1)
****************************************************************************
4616 Wellston, San Diego 92130
5 br/3.5 ba 3,909sf
YB: 1992
Monthly fees: $178
SP: $684,500Â 6/92
SP: $1,590,000Â 7/09
MT: 36 days
This cash buyer had just purchased another slightly smaller house (200sf) in Carmel Valley in January, 2007 for $1,280,000…..all-cash, and hasn’t refinanced. We’ll call this a
MOVE UP (#1)
******************************************************************************
5833 Meadows Del Mar, San Diego 92130
5 br/5 ba, 5,942 sf
YB: 2004
Monthly fees = $437
SP: Custom built by seller
SP: $2,558,500Â 7/09
MT: 55 days
The seller’s $2.4 million loan may have played a part in this one too, because the 60 ft.- wide lots don’t seem to bother folks in Meadows Del Mar. The buyer had purchased his previous residence in 2003, and a rental in 2004, both in Carmel Valley, and didn’t refinance either to buy, so we’ll call this a
MOVE UP (#2)
*****************************************************************************
There are a variety of cash buyers, and reasons for buying. Where does the money come from? We can only make a case for one of the seven above that it came from their previous residence, but there were probably some real estate-related investments that led to some of the equity used – just not other houses sold right around here.
Â
P.S. The former owner of orchidia who paid $2.3 and got foreclosed looked like the developer who sold to himself, but never occupied.
Re: the move-downers… Daaaaaang! Nice resale on their first house. Living in a $1MM+ home with no mortgage payments? Where do I sign?? 🙂
I can’t speak for everyone, but as a cash buyer I can say that I did a number of things to put myself into this position.
1) Owned my own business that brought me good money.
2) Sold in late 2004 a place I bought in 1998 at a very nice profit.
3) Inherited some.
4) Saved and lived frugally. (It’s just my nature)
More than likely, most cash buyers have a mix of things that put them in their position.
I get where these cash buyers are coming from. What I don’t get is where all the rest get their money. It just seems like in SD there’s a large amount of all cash buyers floating around.
Jim – your first example… I don’t understand why you assume it’s a generational purchase… Just because they used the Mission Hills address as their address on the tax rolls, they may be planning on moving to the new pad soon and using M.H. as a rental. I don’t think you can make an assumption about it being a generational purchase. Just my 2 cents.
“Bizzle wondered about the all-cash buyers.”
Wall St. bailout recipients. Banks buying through 3rd parties. Drug dealers, same deal. Fools and nitwits. How and where this group gets its money is an eternal mystery, but it happens.
Anyone with cash, legal or other wise, looking to park it.
None of this makes for stable neighborhoods and communities.
Believe it or not some people are actually pretty savy investors.They do the exact opposite of the herd.Great for them.This is america right?If you work hard and spend wisely you can become wealthy.It does not happen overnight.It takes years to learn discipline and investing techniques.
Sometimes we all forget that San Diego County is one of the nicest places to live on the planet for our climate and location. Are things tough right now? Damn right they are for 90% of us. The 10% of the people in the World who have 90% of the wealth (seems about the right ratio) have a lot of wealth and most likely cash stashed. To drop 1 or 2 M on a home is nothing for many people, like me deciding to go out to dinner or cook at home in relativity. San Diego will remain a destination of choice and wealth as its just a nice place to hang your hat.
I’m not certain how many of the 10% crowd is here, of course, there are a few. LA would seem to grab much more attention, though in SD maybe one can be more private.
In Spotty’s list only #1 and #4 are things in everyones power.
@7 arizonadude,
This was America.
“If you work hard and spend wisely you can become wealthy.”
Doesn’t apply from 2003-2009. If you speculated, bought more than you could afford and you got out, you became wealthy. If you didn’t, you were a sucker who can enjoy lots of free rent until the sheriff shows up. If you didn’t play the game, you’re a patsy.
Yours truly,
Patsy
Consultant – it may be an “eternal mystery” to you, but there are plenty of people in town who make good money that are not drug dealers, bailout recipients, etc.
Like Spotty, I run my own company. We are doing well, even in this recession. I have been doing this for 20 years and in that time have made literally millions. I also live well below my means.
I am in no hurry, but I am beginning to look for a new primary home. I will certainly consider paying cash for it, if it seems to make financial sense at the time.
jk- great points.there was specualtion and that is healthy IMO.
“Spokesman Rick Weinberg of the Real Estate Disposition Corp. said the lowest price was $30,000 received for a house in Stockton. It original housing boom high: $290,000.”
http://www.sacbee.com/static/weblogs/real_estate/archives/2009/07/133-area-homes.html
There are only so many all-cash buying knife catchers out there. Nowhere near enough to soak up all the Alt-A and option ARMs that are due to recast over the next 2-3 years.
Be patient.
@7 arizonadude,
Speculation is fine until I/you have to pay for it. Free markets aren’t free if there are bailouts.
It is not just here that people pay cash for houses. I recently visited Seoul, South Korea. Housing there seems at least as expensive as it is here and from what I understand, there is no common mortgage system–nearly all cash transactions and prices ther are on the increase. It is not uncommon for someone to pay $2 to $3 million dollars cash for a condo.
Sometimes we all forget that San Diego County is one of the nicest places to live on the planet for our climate and location.
You’ll find people around the world that’ll say the same thing about where they live, and there will be money & prices to support that.
HOWEVER, there are still more houses pretending to be $1M+ than people that can truly afford to pay that for them. That’ll disjoint will fix itself eventually, of course.
This thread is turning into another “Knifecatchers! Just wait, prices will come down” rant.
The point was supposed to be that there are cash buyers out there. And there are lots of them.
Jim, nice post. People often seem to think no one could possibly have more $ than they do. 😉
Actually in South Korea they do have a mortgage market. And 90% of the loans are ARMs:
http://www.korealawblog.com/entry/koreas_own_coming_mortgage_crisis
Ignore the prices in Seoul. South Korea and Britain’s housing bubbles are much bigger than ours.
For some perspective, in Japan the commercial real estate bubble fell 90% in value and has never recovered. It will probably not recover back to its peak for another *100 years*. The residential real estate market took 21 years just to stop declining. That will also probably not reach its peak for another *50 years*. $5,000/sqft is tulip prices.
Sure, there will always be people with cash. Proves nothing.
For a little perspective, catch the video posted over at Zero Hedge (noting that San Diego is third city from the left):
http://zerohedge.blogspot.com/2009/07/housing-tunes-acme-cheap-credit-vs-wile.html
Nice link TJ. I’d say though that the video is confusing and not really the right way to express things. The choice of normalizing both the median income and housing prices to the common value of $100 in 2000 isn’t sensible. It would have been better to have shown the median house price to median income ratio as it evolved over time. It ends up showing the relative boom in prices during the bubble, but not changes in affordability that various places have experienced.
Exactly, I posted comments to that effect on the video as well. $ implies an actual value, an index should be 100 or 1.0. Also the lack of a logarithmic scale really distorts the changes by exaggerating changes in recent years and downplaying changes in past years.
Dwip,
Affordability is mostly a function of interest rates, therefore I can see them ignoring that. Remember how all the toxic mortgages were touted as “affordability” products?
Using one national MI figure seems over-simplified, too, but the general idea of demonstrating relative income-to-prices still holds.
Good points, sdbri.
Yeah, ditto. Good point about how a log scale should have been used. I wish I had said that. I’m sure next time I will, and claim I remembered all by myself. 🙂
“Free markets aren’t free if there are bailouts.”
Free is not the same as fair. This is the best country money can buy.
Our ancestors have many times in the past distrusted markets, and our children will at times in the future. They are instruments of the wealthy when boiled down, but we have no other good options.
Paulson had a bad choice and damn bad choice. He tried the bad one but had to use the damn bad one.
“This is the best country money can buy.”
Arguably true, however we’ve been doing obscene amounts of borrowing to pay for it. That can’t last at the rate we’re at.
…
These types of threads are always interesting. People in general seem to have a hard time with the fact that a lot of people out there make, and have more money then they do.
Business owners, trust funds, stock options, gambling, stock market, lottery winners, inheritance, consistent 6+ figure salaries, luck – there’s many places were money comes from.
Lots of people out there are losing their shirts right now. And lots of people are making a killing. Lots of people somewhere in between the two. It’s not all one or the other right now, like so many try to make it seem.
A lot of people in San Diego have more money then you, me, and probably every other reader of this board.
Thanks Aztec, and agree about the point of the post – just to note that there are cash buyers, and to follow up on a reader question in more detail.
I’m not here to provide a forum for overly negative comments – you’re running off readers. I can tolerate a spirited debate, I think that has been proven – but from now on I’m going to delete the blantant rants whose only intention is to disrupt.
Where does the money come from?
Perhaps San Diego will be renamed New China!
.
They have money, remember; OUR MONEY!
You ask: where do the cash buyers come from?
I cashed out in 2004 (dumb luck, had to move across the country) and have been renting since.
So that’s where I came from.
I expect to buy in 1-2 years, when I feel prices have stabilized in my area.
“Perhaps San Diego will be renamed New China!
They have money, remember; OUR MONEY!”
doesn’t look like any of these all cash transactions are from China.
Obviously there are just too many cash buyers today that are just making too much money……..hey…. Mr President…over here…..lots of extra bucks to tax to use for….whatever your heart desires.
I would venture to say that many of those people who are having a hard time believing there are many people making more than them seem to think that those people drive around in the same cars, jeans, shirts and watches as they do. So next time, at the stop light when you see that person in a beater pick up trick, think twice before you judge.
So next time, at the stop light when you see that person in a beater pick up trick, think twice before you judge.
You mean, like, a 60’s era Chevy with a suspiciously intimidating engine? 😉
Business owners, trust funds, stock options, gambling, stock market, lottery winners, inheritance, consistent 6+ figure salaries, luck – there’s many places were money comes from.
Actually the sources mentioned are merely a transfer of money from one party to another. The only place money can be created from is the Fed or a counterfeiting operation.
A fool and his money are soon parted.
MKN,
That’s actually not completely correct. Any of the member reserve banks can create money in the US. As soon as a loan is made, money is created. They only need to ensure sufficient reserves are in place, which is regulated by the Federal Reserve.
chuck
“A lot of people in San Diego have more money then you, me, and probably every other reader of this board.”
Yup, I went and looked at the county profile at the Census website. The latest data is from the 2005-2007 American Community Survery. Keep in mind that this data is from the peak of the housing market.
Total number of housing units valued at $1 million or more: 56,017
Total number of households with income over $200k: 57,935
Please pick away at these stats, but it doesn’t seem that prices are significantly out of equilibrium right now. The fact that these were taken at the housing height just make the high more affordable to a larger number of people. I should note that I think we’ll see further declines in prices for reasons that have been repeatedly stated. However, it seems sometimes that people think most people work for minimum wage at McDonald’s
“There are only so many all-cash buying knife catchers out there. Nowhere near enough to soak up all the Alt-A and option ARMs that are due to recast over the next 2-3 years.
“Be patient.”
JAP
****
This may take longer than 2-3 years. Some of those ticking time bombs have a 10-year fuse, which means 2014 and beyond. Who knows what will happen to inflation by then.
http://healdsburgbubble.blogspot.com/2009/05/reset-chart-from-credit-suisse-has.html
“…when Wells Fargo purchased Wachovia it acquired about $120 billion of Option-ARM loans originated by a Northern California company called Golden West.”
*****
“In short, Wells expects $56 million in Option ARMs to recast due to the loan balance reaching 125% of the value of the original loan and another $269 million to recast based on the terms of the loan. Given that we’re talking about a portfolio of over $100 BILLION of these loans, this means ESSENTIALLY NO LOANS WILL RECAST due to the negative amortization limits or contractual terms before 2012.”
Another potentially positive aspect of inflation could be the ability of the US to pay off those treasuries, that we sold to foreign investors, with much cheaper currency.
So, while the Fed may have the ability to reign in inflation. The question becomes, do they want to?
‘So, while the Fed may have the ability to reign in inflation. The question becomes, do they want to?’
Pretty sure they don’t want to, the question is though will China/etc let them?
…
‘Some of those ticking time bombs have a 10-year fuse, which means 2014 and beyond. Who knows what will happen to inflation by then.’
Who knows what will happen to fence sitters patience by then too!
Fence sitters are a hearty bunch. When you work for your money you’re much more conservative when spending it.
Also consider that many commenters on blogs are likely computer people. If you’re like me and work in the industry you’ve seen times like the dot com crash and the fallout from it.
To me the current housing market feels much like the dot com bubble before it popped. I mean step back and think about what would have happened if Bush and the Treasury didn’t step in with the TARP program? Homeowners would have been screwed as banks starting calling in debt to pay their creditors. Instead the gov gave BILLIONS of our tax dollars to a private company to slow the “burn rate”. (old dot com term)
sdbri–Wow–Thanks for the clarity–I was obviously mis-informed!
I’m with Jim — some of these comments are ridiculous. It’s one thing to sit out the housing bubble and be proud that you rented and saved. It’s a whole ‘nother matter to be bitter at wealthy people who can afford to buy a house with cash.
Granted, I probably run in a different circle than some folks on this board. I’m self-employed; have been since 2001’s dot-com bust. I moved to San Diego because I can work from anywhere and I enjoy the weather here.
I know plenty of people here in N. County who own their own businesses and have cash to buy a beach house. Funny thing is, we are all renting right now. I invest $8-10K/month myself, and that doesn’t include what I put into my business.
Bitterness isn’t healthy, folks. I do believe pretty much anyone who is willing to listen and learn how to sell (ethically) can make good money. Don’t knock it until you’ve tried it.
-Erica
sdnerd,
You may find this interesting…
http://online.barrons.com/article/SB124749594854632905.html#mod=BOL_hps_dc
THE WORLD’S MAJOR GOVERNMENTS are getting edgier about having their assets mainly in dollars. But they’re caught in a conundrum: They’re damned if they dump their dollar holdings and damned if they continue to add to them.
One solution: instead of reducing dollar assets, why not issue dollar liabilities? If you’re worried about the U.S. currency losing value and its special status, those debts would get paid off in cheaper dollars.
Just being born in America puts a persons wealth light years ahead of Billions. Thats with a B.
The readers here are among the wealthiest in the world even working for ‘McDonalds.
My point was probably not at all understood and I do not want to undermine JtR so I shall refrain and shut up.
‘sdnerd, You may find this interesting…’
Indeed – thanks for the link!
It’s going to be rather interesting to see how everything plays out. I don’t think the reserve currency is going to be changing anytime soon. Wage inflation, also probably 2+ years out at the soonest.
So at least I (hope), sitting on a large pile of down payment cash is going to be relatively safe another year or two here.
Here’s to hoping the mid to high end inventory ramps up in the near future here with softer prices. The thought of getting into a bidding war so soon after the mother of all housing bubbles just seems…wrong.