After some filler in the beginning, you’ll see a good example of how the “haves” are acting.
They prefer the quality locations, which is understandable (and recommended!). This building had been renovated by the seller, so that saves some time and money. In the off-season, you could probably get $3,000 or so in rents, but you’d be hard-pressed to call this a normal investment property bought for cash flow.
Nobody watching this would have paid the $1,250,000 peak price, but how many would have paid the current price? Yet after 32 days on market, a buyer came along and PAID CASH:
P.S. This same property sold for $680,000 in 2002.
It’s pretty amazing that cash buyers would pay such a premium to flippers when they could just bid at the auction themselves.
FWIW, I still think they overpaid, but since they don’t have a mortgage, at least the taxpayers shouldn’t end up making their house payments for them. There’s a silver lining to everything if one looks hard enough. 😉
I think some of the cash buyers must be people who inherited the money.
We’ll never know, but it seems like some of the all-cash purchases are made with less investigation than those financed (i.e. paid too much).
Hat tip to Matt who sent in this link to the Big Picture, where Freddy shows that US housing has overshot:
http://www.ritholtz.com/blog/2010/09/realty-bubble-monitor-long-term-charts/
Jim,
Have you seen any evidence of laundering drug money?
If I were a Mexican drug dealer/smuggler (one of the big ones), I could see the temptation to spread some of that cash around in U.S. real estate. San Diego is right on the border and has lots of expensive property where you could easily stash a million or two…or ten. These buyers wouldn’t care much about losing 10-30%, because it’s just part of the (accepted) risk of laundering money this way.
Does the govt have any safeguards in place to make sure this isn’t happening?
So much for objectivity.
CA Renter, Drug money = Market Stability?? Please tell me that you are joking. If not, your desperation for a drop in prices has really hit bottom.
No, I’ve actually heard rumors about this (cash purchases by people in the illegal drug trade) from pretty reliable sources. It’s a multi-billion dollar industry. Why would anyone doubt that this is going on? I’m just trying to get a feel for the volume of these transactions from people who are on the RE side.
Mind you, I know there are a lot of funds out there that are investing solely in real estate, and there are other investors, business owners, and heirs who are using cash as well. The drug money is obviously separate from this.