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News and culture through the lens of Southern California. Hosted by A Martínez

#SoCalSoCurious: Who are the cash buyers in SoCal real estate?

by Leo Duran | Take Two®

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A 6 bedroom, 7 bath property estimated at a little over 6 million USD sits for sale in Arcadia, California on May 17, 2016. FREDERIC J. BROWN/AFP/Getty Images

SoCal. So Curious. When we answer your questions about how things work in Southern California – and why

Lauren Martinez lives in Pasadena, and has been looking for a home to buy with her husband.

"There was one town home that we found here in Pasadena that we just loved," she says.

It had a fireplace, an outdoor space for a dog.

"The upstairs bedroom was just amazing," she says. "It had this huge window that was really, really big and just had this gorgeous view of all these trees."

So she and her husband put in an offer. The seller seemed to like it.

"But then we ended up losing out to an all cash buyer," says Martinez, "and we’re just like, 'How can we compete with that?'"

She asked SoCal. So Curious: Who are all the cash buyers in SoCal real estate? And where do they get their money from?

Her friends and family suggested it might be foreign investors, which might have been true a while back.

"Those days really passed 4, 5 years ago," says Geoff McIntosh, president of the California Association of Realtors.

Back then many of those people came from China, but they're just about 5 percent of the cash buyers right now according to the association's research.

Deep pocketed American investors used to buy in all cash, too. But that was mostly right after the housing collapse in 2008 when they lapped up whatever cheap homes they could hoping to turn a profit once the market picked up.

Cash buys are still a thing, though.

Last month, he says 20 percent of all real estate transactions in Southern California were paid for in cash.

So who's outbidding Lauren with cash?

People with rich parents.

"They're going to mom and dad and saying, 'We really want to buy something and would love it if you give us the money,'" says McIntosh.

Other experts agree.

"Some parents are very very very well off and are capable of making a gift of a house to a kid," says Richard Green, director of the USC Lusk Center for Real Estate.

Green adds that his research shows another group that makes up cash buyers: people in the tech industry.

"People who work at Google, people who work at Facebook, people who work at LinkedIn," he says.

Some of these people aren't just paid well, but they're also paid with stock options.

When their hot tech company goes public, that means they can cash out. Big time.

"In California, people sell stock to buy houses in a big way," says Green, noting that it's a phenomenon unique to just our state and New York.

That doesn't mean Martinez should lose hope.

Realtor Geoff McIntosh says if you don't have cash, try to make up for it with tons of personality.

"We’re still in a people business," he says. "Absolutely you have to sell yourself. Write a compelling story about why purchasing that particular home is important."

Have a question you want KPCC journalists to investigate? Ask below or visit our SoCal. So Curious. page.

 
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