Why are so many able to afford cash offers for million dollar + homes in Southern California?

Repeal all zoning laws now.

(Ok, not quite, but basically)

A million dollars does not mean as much as it once did. It is a convenient reference point but there are simply a lot more people who have way more than a million dollars in equity and, with housing supply shortage, that’s what fairly normal houses cost in high cost of living areas (certainly more in some neighborhoods!). Even in my low cost of living area there are neighborhoods where a million dollars is an entry level home.

These days most people who have decent jobs and who have fairly conservative spending and investing lifestyles can retire as multi-millionaires.

sbeefyk2 wrote:

You’re not wrong. I’m 32 and moved to Irvine in 2015. I’ve seen it with my own eyes in the communities, and talked with many people in the area and what happens is this: the Chinese buy a home, never move in, and just resell it in a couple years to another Chinese person.

Irvine has been a Chinese living destination for more than 30 years. It is the "626" of Orange County. The "626" (the Gabriel Valley are east of Los Angeles) is the main Southern California living destination for Chinese people moving to the United States. Why? Because living there is like living in China. Speaking English is not required because there are an huge number of small Chinese owned businesses catering to them (as well as American owned businesses that hire Chinese speakers as employees to make a buck off of them).

The main reason that Irvine is seeing so many foreign home purchases (China is hardly the only country) is that the predominately white people of Irvine shot down converting the El Toro Air Force base into a major airport. And to prevent the airport from ever being a possibility of becoming a commercial airport, the city promptly auctioned off the open space to home developers.

Thousands and thousands of new homes being built is what brought in buyers, and foreign buyers, especially Chinese, will pay extra for a new home because it is a sign to others that they have made it.

I know the above is all fact because I have lived in Orange County for nearly 40 years, and I met my Chinese wife (an American citizen for 20 years) in Irvine. I knew years ago that the Irvine plan to quash the commercial airport was going to cause trouble because there were not enough people who would be able to buy the new homes they were planning to build. "Where were the buyers coming from for million dollar homes?" You have you answer -- foreigners flush cash and looking to make money ... the American Dream.

There are a lot of wealthy Chinese who are buying US properties as a hedge against things going bad for them in China. Despite Xi's reforms, China is still a very corrupt society. People who have made a lot of money have done so with the help of bribing whoever in the government held a hand out. That advantage can become a vulnerability if the government official you bribed gets in trouble for taking a bribe from the wrong person. So, wealthy Chinese like to keep a home in the US in case they need to flee and claim asylum in the US.

And that is not to say that US buyers don't have money. There are a fair number of people who are in their mid 30s to 40s who managed to ride out 2008 and COVID just fine. They diligently bought into the market when it was in the low 10,000s and are now cashing out in the low 30,000s to free up money for a house. They are hardly feeling a dent of $1-2 mil for a new house.

That is very accurate. I'm 37 and even on my low-wage jobs I've been able to accumulate 125k in net worth and no debt. Even low-wage workers, if you can avoid debt, avoid splurging, etc. and drive older cars you can start to build some wealth. I live in Ohio, so not in CA, so it's much lower, of course.

jecht wrote:

That is very accurate. I'm 37 and even on my low-wage jobs I've been able to accumulate 125k in net worth and no debt. Even low-wage workers, if you can avoid debt, avoid splurging, etc. and drive older cars you can start to build some wealth. I live in Ohio, so not in CA, so it's much lower, of course.

So you've saved diligently, which you were able to do because you live in Ohio, and you're 37, and you still couldn't afford a parking spot in California.

Are you bragging? You aren't in the club dude.

I'm not bragging; I'm just saying that even with lower wages one can still get in a mindset of saving and accumulating wealth. I make 38k and am able to put $ away.

Someone in CA should be able to easily save millions if they are frugal.

It's proportional.

As an ex-Facebook employee once said, "The best minds of my generation are thinking about how to make people click ads."

If you work in tech and you're making $300-$400k/yr you can save $50k/yr. After 15 years with 7% interest that's 1.3 million.

Lead Foil Hat II wrote:

Most computer related work is barely STEM, it is just quality BSing, advertising agency crap, savvy "click-bait" development; most of the CS workers in that state would be worthless is any setting that was not flooded with excess money; they have no value outside of the system and most people could replace them. Give yourself a break, there is no defending the fact that CA can't take care of the majority of the people in its state. They need to tax the people earning more than 100k way way more and tax their employers even more until they can fix the budget and poverty issues that plague the state. There is no reason so many people should have $1 million cash on hand to buy houses outright. People are paid too much in CA for doing next to nothing.

The rare letsrun hot take about California that I actually mostly agree with...

This post gets it. So many basement dwellers with zero understanding of the world. Chinese nationals are parking their cash in America. For many, it's money laundering. The Chinese government also limits the number of homes someone can own in China so those who have made it will buy foreign properties to diversify their assets.

jecht wrote:

I'm not bragging; I'm just saying that even with lower wages one can still get in a mindset of saving and accumulating wealth. I make 38k and am able to put $ away.

Someone in CA should be able to easily save millions if they are frugal.

It's proportional.

Agreed.

I only make $42K a year, but was able to save up $60K for down payment in about six years.

Jecht knows whats up wrote:

jecht wrote:

I'm not bragging; I'm just saying that even with lower wages one can still get in a mindset of saving and accumulating wealth. I make 38k and am able to put $ away.

Someone in CA should be able to easily save millions if they are frugal.

It's proportional.

Agreed.

I only make $42K a year, but was able to save up $60K for down payment in about six years.

That is the saddest thing I’ve ever read.

Just keep in mind that majority posters on this forum earn over $250,000 individually or $500,000 per household, you’ll realize what you are describing is not very surprising.

live in the worst part of CA wrote:

It IS a lot of cash coming from mainland China. Are they just all amazing savers or is there some way they get vast sums of cash transferred over somehow?

Cashing out stock options from you tech guys?

Irvine home prices are insane but realtors say people will pay any price, no questions asked if they like the home.

This has been going on for a decade and it’s not some fake bubble that’s going to burst as many predicted.

Because we live in the most unequal society in modern times. Our souls are dead but our houses are spacious.

Why is the saddest thing you've read?

I don't make much but am just starting out in the company. 38k at least gives me a livable salary, $2417 a month after taxes. I am able to save about $395 a month for emergency funds; the rest go to expenses and my retirement account/investments (about $705 a month). Rent is $679/mo. Hoping to become either underwriter or go back into dev in a few years with my current company. Both roles would pay 70-80k, which isn't a ton but in Ohio it's enough to raise a family on, and if my fiance gets a good teaching job in the suburbs, it'll give us a good standard of living.

My aunt is a cardiologist and used to live in Woodside, Calif., and she always complained about the expensive homes but was able to afford one. Go figure.

Rich Uncle Pennybags wrote:

Jecht knows whats up wrote:

Agreed.

I only make $42K a year, but was able to save up $60K for down payment in about six years.

That is the saddest thing I’ve ever read.

+1

Find happiness in your life but don't pretend you're doing that great. 6 years for a down payment my god. 7.5% of your life TO SECURE THE ABILITY TO BUY HOUSING. This system is taking you for a ride and you think you have valuable advice for anyone.

jecht wrote:

Why is the saddest thing you've read?

I don't make much but am just starting out in the company. 38k at least gives me a livable salary, $2417 a month after taxes. I am able to save about $395 a month for emergency funds; the rest go to expenses and my retirement account/investments (about $705 a month). Rent is $679/mo. Hoping to become either underwriter or go back into dev in a few years with my current company. Both roles would pay 70-80k, which isn't a ton but in Ohio it's enough to raise a family on, and if my fiance gets a good teaching job in the suburbs, it'll give us a good standard of living.

My aunt is a cardiologist and used to live in Woodside, Calif., and she always complained about the expensive homes but was able to afford one. Go figure.

You’re doing fine. You’re fortunate to not be always wanting more as it never ends.

A dentist with a small contract is still making over $200k per year. Let's say they've got a spouse who is also making $50k per year. Conservatively they are still bringing in $170k after taxes. They can easily save $100k+ every year even after saving some 401k and their regular life expenses. So by the time they're 35 years old they've got well over a million dollars in the bank, there's your cash offer. Nearly 1 in 10 married couples in America have a combined in come of $200k, and could have a million of cash saved up by the time they're 40. 1 in 20 couples could do it much earlier. So I imagine these are the types of people who are doing cash offers of 1 million dollars in their 30's.

If you live somewhere else and homes are only $250k-$500k even more people could do it.