A Little Money Laundering Can Have a Big Impact on Real Estate Prices (2019)
This article isn&#x27;t entirely true.<p>Yes, prices are set by the margin, so small changes in supply and demand can have outsized effects on prices.<p>But the article completely falls apart here:<p>&gt; <i>If you are money laundering... The objective is to move as much cash, as fast as possible. This often involves large assets, and the bigger the price – the better... Both the seller and the money laundering buyer want the highest acceptable price... Competition between interests align, and there’s minimal friction preventing prices from going higher.</i><p>This gets it completely opposite and wrong. It doesn&#x27;t matter if you&#x27;re laundering money or not -- you <i>still</i> want the best deal on an asset. You still want to sell eventually, and the lower your buying price, the more profit you&#x27;ll make later. Everybody still wants to make a profit.<p>A launderer will <i>always</i> prefer to buy 2 properties at a market value of $1 million each, over buying one of those at an inflated $2 million. <i>Always</i>. The laws of supply and demand don&#x27;t disappear just because you&#x27;re laundering money.<p>The idea that &quot;the objective is to move as much cash, as fast as possible&quot; is totally made-up and totally ludicrous. The idea is to move the amount you have, in a reasonable timeframe, at the most profitable price.<p>The <i>only</i> reason money launderers can have an outsized effect on the real estate market is because they generate more demand. Period. But that demand is <i>no</i> different from legitimate buyers. Demand is demand. That&#x27;s the entire story.<p>(Of course, if laws around LLC&#x27;s and scrutiny around real estate deals were changed then that demand might dry up. But that doesn&#x27;t have anything to do with the laws of economics.)