Solar cells based on hybrid perovskites have shown high efficiency while possessing simple processing methods. To gain a fundamental understanding of their properties on an atomic level, we investigate single crystals of CH3NH3PbI3 with a narrow transition (~5 K) near 327 K. Temperature dependent structural measurements reveal a persistent tetragonal structure with smooth changes in the atomic displacement parameters (ADPs) on crossing T*. We show that the ADPs for I ions yield extended flat regions in the potential wells consistent with the measured large thermal expansion parameter. Molecular dynamics simulations reveal that this material exhibits significant high asymmetries in the Pb-I pair distribution functions. We also show that the intrinsically enhanced freedom of motion of the iodine atoms enables large deformations. This flexibility (softness) of the atomic structure results in highly localized atomic relaxation about defects and hence accounts for both the high carrier mobility as well as the structural instability.