House Flippers Helping To Fuel Foreclosures

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

The housing market has been taking a beating lately and the number of foreclosures on the rise.

Analysts are now placing some amount of blame on “flippers” -speculative real estate investors that bought homes to either repair or to hold and sell to someone with the hopes that they could raise the asking price and turn a nice profit.

In many of cases, the money used to purchase these homes was OPM (Other People’s Money) and the original investor isn’t “flipping” the house and is instead defaulting on the loan.

“California, Nevada, Arizona and Florida were among the states with the fastest home price appreciation over the last five years. This…attracted both speculators and home builders, a volatile combination that led to an over-supply of homes that was beyond the capacity of the local populations to support,” Duncan said.

“When this over-supply became apparent and prices began to fall, many of these investors simply walked away from their mortgages.”

In 2005, Arizona and Nevada 29% of all the prime mortgage loans written were for non-owner occupied home purchases. Florida accounted for 32% and California was 14%.

This sounds like a dramatic turn of events for those that were enjoying success on the notion that a “rising tide lifts all ships.” Now it seems those very waters have left them stranded on a
sandbar.

CNN

If you enjoyed this post, subscribe to the Superior Investor Blog RSS feed!.