There are several major markets in which cash buyers are a near-majority of all buyers. Such circumstances depress prices. If and when the dollar strengthens against other currencies, the flood of risk-taking foreign investors from Europe, Asia and South America, buying American properties with cheap dollars and no mortgage, will suddenly recede. At that point there will be few to no buyers, on any terms, and the effective then-prevailing market value of some properties will approach zero.
Real estate values can be tricky and sometimes prone to understatement on account of their illiquidity. However, there are some markets in which there are far, far too many properties -- condos come to mind -- lacking any
Combine these factors with the move towards mandated down payments of at least 20% of the purchase price, higher mortgage rates and generally stagflationary or recessionary economic conditions, and it is very hard to see how real estate prices will not continue to move steadily downward...or plunge sharply downward at any moment.
Eric Dixon is a New York lawyer, strategic analyst, management and business consultant in the real estate and energy industries, and political consultant. Mr. Dixon may be reached for further comment or consultation (for a fee) at edixon@NYBusinessCounsel.com.