Who are all these cash buyers in Carmel Valley??

[SD Realtor]

Agreed with you DR. I think it is foolish to park hard cash in RE right now.

I would definitely take advantage of a mortgage for many reasons. Inflation protection as well as leverage. If you anticipate much higher interest rates in the future, why not keep cash available to purchase high yield bonds that will be available when rates go up, rather then have that cash tied up in a home. Imagine having a mortgage, or several mortgages if you are an investor at say 3 or 3.5%, and you then having several hundreds of thousands of dollars available to lock into double digit yielding bonds. (check out bond yields in the early 80s).

You would do very well. Seems like a better way to go rather then putting all your cash into a home. I guess it just depends on your outlook.

[flu]

It’s quite simple what some people are doing…

1. Go in with cash offer.
2. While in escrow, tell seller you’re going to get a loan, but closing is not contigent on loan.

Buyer won’t care so long as you close on time. Everything looks like cash at the end anyway. The only thing you’re doing is removing loan contigency…Only works with strong buyers…

As far as foreigners. They might not have a loan domestically, but nothing says they aren’t getting the loans abroad….

[FlyerInHi]

[quote=dumbrenter]

Flyer, I’m not sure I follow the connection between interest rates and buying a home all cash. could you please elaborate?[/quote]

If you got th money sitting not earning anything. Why not buy real estate at the bottom? can’t lose.

[The-Shoveler]

[quote=FlyerInHi]Yes American real estate is cheap. But taxes and maintenance are high.

If you’re a global businessman, buying a house so you kid can go to a top university is a bargain. The house will not diaapear so the capital is still preserved.

Interest rates are low so parking money in real estate, especially If it’s something you can use is not a bad deal at all.[/quote]

Just a note on that,
The China Gov has been hinting fairly strongly that they intend to impose property tax at some point in the future.

Also for SDR,

Not all countries have FDIC insurance, just look at Cyprus also some are a little nervious about bonds, not that I worry about the U.S. Bonds but some do.

[SD Realtor]

Now I would definitely agree with you on that point Shoveler.

When the govt does decide to take away assets, it is much easier for them to simply lock up the banks, trading firms, etc.

However once they do that, I presume taking property is not far behind.

[CA renter]

[quote=SD Realtor]Now I would definitely agree with you on that point Shoveler.

When the govt does decide to take away assets, it is much easier for them to simply lock up the banks, trading firms, etc.

However once they do that, I presume taking property is not far behind.[/quote]

I think Shoveler is referring to the foreign countries taking assets from “corrupt” businessmen, traders, etc. IOW, the Chines govt taking assets from Chinese businessmen, so these people buy RE in other countries (like the U.S.) to help protect their wealth.

[earlyretirement]

I tried picking up some properties in Carmel Valley last year as well as early this year before I just gave up. Fortunately we weren’t desperate to buy like some of these families now looking for houses to move in to them before the school year.

We were trying to just pick up a townhouse not a SFH but we know several friends that bought in Carmel Valley in the past 6 months or so. A few of them seemed like they weren’t totally in love with the property but just got desperate and “beaten down” looking.

I was having lunch this weekend with one of our friends that bought a SFH in Carmel Valley in December and she said she just felt beaten down and like it was a full time job looking for a house. She “gave in” and bought a house there.

I really think many people are going to have some serious buyer’s remorse here in a few years because they bought properties they weren’t in love with.

I think the numbers out there tend to show that about 30% or so of the buyers out there are cash buyers. I’m not sure if that is still the case but the last time I checked it looked to be about 3 out of 10 buying in cash here in the SD area. I’m not sure if it’s higher in Carmel Valley or not but some of the properties we lost out on were cash buyers.

I went in with 50% cash offers on a few properties and we got beat out by 100% cash offers. I don’t blame sellers for wanting cash and being able to close quickly. After all, a few years ago when we were buying…we paid cash for our house to negotiate a good deal and got a really great price that way. More deals were falling apart back in 2011 vs. today.

FlyerinHI makes a good point about legitimate business people. I agree. I’ve met a TON of families here since moving here from other countries. I can’t believe the number of Colombians I’ve met here in San Diego. As well, Russians and several Mexican families. I’m starting to meet some Argentineans and Brazilians as well. Previously I mostly saw Argentineans and Brazilians buying on the East Coast (Miami, NYC, etc) but I’m seeing some shift some of their funds to SoCal now.

It’s funny because sometimes I hear all this talk about wealthy Chinese buying here in San Diego. Just where is this happening and have you guys seem examples of this? If so, where? You realtors on the board…. are you seeing wealthy Chinese buying here with cash?

I was just curious about that. I’ve read about it on a few forums but when I press for actual developments where this is happening no one ever has anything to say. So if you guys are seeing it, please post as I like to keep up with actual trends.

You have to remember that real estate is still fairly cheap here for many foreigners. It might be expensive to Americans but real estate is very expensive in many countries. Even countries that are relatively poor or with tons of problems still or poor economies are expensive. You have properties in some of these major cities in these countries that are much more expensive than San Diego. So to them it’s cheap.

As well, traditional cities where foreigners tend to buy like NYC are VERY expensive today. By rotating out of traditional cities like NYC and getting some of those funds to SoCal properties here is really cheap for them compared to places like NYC! Especially at the sub $1.5 million dollar market. Here $1.5 million actually buys quite a bit of house! In NYC..not so much… Plus some of those HOA fees in cities like New York are absolutely crazy. Here HOA fees even in upscale communities is relatively cheap.

The dividing line of crappy tract homes in the $700s to $800’s really starts to drastically improve on the quality now once you can go over the $1.1 million or so range.

And add in Proposition 13 and buying here with 1% property taxes along with capped increases in property taxes and our property taxes are VERY cheap compared to the East Coast. Heck, even compared to crappy cities like Dallas our property taxes are CHEAP. In some of those cities they are approaching 3% a year.

You have to also remember that in many of these countries it’s totally normal for the locals to pay CASH. In fact, in some places it’s the norm, not the exception. So it’s nothing to them to pay cash for a property.

I do think that some of the cash buying is people that are cashing out of their stock market portfolios. I know tons of people that have liquidated their stock market portfolios here in the past few months and have tons of cash on the sidelines. I’ve even heard of people raiding their retirement savings or borrowing from their 401Ks to buy real estate which I think is totally foolish.

As well I’m 100% sure there are lots of people that are using credit card balance transfer offers out there. Credit card companies are starting to relax their standards again. Just like during the bubble. It’s actually surprising! I’m getting these 0% balance transfer offers with the 3% fee weekly now. From ALL of my credit card companies. So I know that most others are probably getting them as well.

Many of them say 0% until August 2014 on them. The banks are essentially getting free money and they are using higher risk gimmicks like this again. I’m really surprised at some of these things. I’m sure there are people out there leveraging and using credit cards out there as well in stock market and also real estate market.

So on one hand they are paying cash but they are taking those funds from essential sources that they definitely shouldn’t be raiding. It will be interesting to see how this all plays out.

I’m also curious to see how a few properties that I’ve seen that went into Escrow within a few hours/days close at. Definitely an interesting interesting market!

[RoyceKemp]

I’m a REALTOR and I can attest to the Chinese buying all-cash! I’ve worked with a client, fresh from getting his Master’s in Mechanical Engineering from Michigan and whose Dad bought him a home, and then a couple of other investment properties.

Also have a former colleague (I was once in Computer Engineering) who is Chinese and helped a friend from mainland China buy a million dollar home in Carlsbad sight unseen. The money is definitely flowing in from China, and is driving up prices.

[earlyretirement]

[quote=blueeyedlion]I’m a REALTOR and I can attest to the Chinese buying all-cash! I’ve worked with a client, fresh from getting his Master’s in Mechanical Engineering from Michigan and whose Dad bought him a home, and then a couple of other investment properties.

Also have a former colleague (I was once in Computer Engineering) who is Chinese and helped a friend from mainland China buy a million dollar home in Carlsbad sight unseen. The money is definitely flowing in from China, and is driving up prices.[/quote]

Thanks blueeyedlion. Is there any specific developments or areas you see this happening more than another?

For example, your client that bought whose dad bought him a property… what type of property was it? SFH? In which area/development? Thanks for sharing.

[CA renter]

[quote=earlyretirement][quote=blueeyedlion]I’m a REALTOR and I can attest to the Chinese buying all-cash! I’ve worked with a client, fresh from getting his Master’s in Mechanical Engineering from Michigan and whose Dad bought him a home, and then a couple of other investment properties.

Also have a former colleague (I was once in Computer Engineering) who is Chinese and helped a friend from mainland China buy a million dollar home in Carlsbad sight unseen. The money is definitely flowing in from China, and is driving up prices.[/quote]

Thanks blueeyedlion. Is there any specific developments or areas you see this happening more than another?

For example, your client that bought whose dad bought him a property… what type of property was it? SFH? In which area/development? Thanks for sharing.[/quote]

ER,

I’ve talked to a few people who were working with Chinese investors, but this was ~2-4 years ago. They (Chinese investors) were pooling large funds (billions) to buy up bulk foreclosures directly from banks, the FDIC (supposedly), and other lending institutions. Also, they were buying foreclosures on the courthouse steps. I’ve talked to people who’ve represented them on the financial side, and also talked to some people who’ve worked in flip/repair crews for these investors. They were buying up mostly SFHs on the low to mid end, here and around the country, to either rent or flip.

[RoyceKemp]

He was about to start working for Qualcomm (a lot of my clients are in the tech industry since I am a former Computer Engineer) and so this particular client targeted areas centered around Qualcomm (UTC, Mira Mesa).

They bought a single SFR for him to live in, and two condos as rentals. They did use financing since he had established some credit here in the States. So it was a combination of financing on the SFR, and all cash for the condos.

[earlyretirement]

[quote=CA renter]

ER,

I’ve talked to a few people who were working with Chinese investors, but this was ~2-4 years ago. They (Chinese investors) were pooling large funds (billions) to buy up bulk foreclosures directly from banks, the FDIC (supposedly), and other lending institutions. Also, they were buying foreclosures on the courthouse steps. I’ve talked to people who’ve represented them on the financial side, and also talked to some people who’ve worked in flip/repair crews for these investors. They were buying up mostly SFHs on the low to mid end, here and around the country, to either rent or flip.[/quote]

Yes, I heard that sort of thing a few years ago. Nothing too specific but the same type of thing. I wonder how many of the recent purchases would fall under that category.

[quote=blueeyedlion]He was about to start working for Qualcomm (a lot of my clients are in the tech industry since I am a former Computer Engineer) and so this particular client targeted areas centered around Qualcomm (UTC, Mira Mesa).

They bought a single SFR for him to live in, and two condos as rentals. They did use financing since he had established some credit here in the States. So it was a combination of financing on the SFR, and all cash for the condos.[/quote]

Ah ok…Mira Mesa seems to be on a tear lately. Just many places, not much inventory at all on the market. Even Mira Mesa seems to be pricing people out of the market there.

[FlyerInHi]

I bought a townhouse in Sorrento Valley. All the neighbors seems to be Chinese or Indians. One guy and his gf from UK.

I think Asians stand out more. But we now live in a globalized world. Plenty of people from Latin America and Europe too — they blend in more. “Glamour” cities will see buyers from all over.

I once read about an HK millionaire buying hundreds of houses in Vancouver years before the 1997 handover of HK to China. He became a billionaire and Vancouver became an international glamour city.

I forgot which economist wrote about glamour cities. San Diego is a 3rd tier glamour city.

[FlyerInHi]

Talking about real estate trends is interesting.

Honolulu has plenty of buyers from the mainland looking for paradise.

Florida, and Nevada attract northern retirees and plenty of Canadians. Canadians are interesting because they blend in just like Americans, until you talk to them. Of course Miami is full of Latin Americans. NY is like the world’s melting pot.

I bought a few properties in Las Vegas. Happy about getting in at the bottom. One complex is about 50% Canadian. Lots of Californians.

In the end we are all Americans from everywhere. That’s what’s great about this country.

[zk]

[quote=FlyerInHi]

I think Asians stand out more. But we now live in a globalized world. Plenty of people from Latin America and Europe too — they blend in more. “Glamour” cities will see buyers from all over.

[/quote]

Entirely possible. Striking, though, how much that echoes a lot of the talk heard during the 2000s bubble.

[Author]

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