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Flippers taking a pounding in CA

sunnyview
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There are lots of foreclosure stories out there about regular folks, but I never really heard much about the number of flippers in markets experiencing high foreclosure rates. I guess no one really cares about them. This article tells a tale of woe in Modesto,CA about a hard working family that bought a house in late 2006 for about 370K that is not selling now for 300K about an 18.9% decline in price in a year.

http://news.yahoo.com/s/csm/ahousetwo;_ylt=AuYXgkvcgnCU16vA1o2yotthr7sF

http://www.zillow.com/Charts.htm?chartDuration=1year&zpid=63322673

What I did not know before this article is that 30% of the houses in Modesto were bought by speculators not homeowners. The second part of this article included a flipper man with two houses that stands to lose them both when his rates reset. Boo hoo. Why should the goverment bail out flippers who gambled and lost? Shouldn't they require that the house is owner occupied so that they are helping owners save their primary residence not flippers?

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December 11 2007 - US

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Marci Reinheimer
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I thought it was for only owner-occupied properties? Then again, I've been wrong before.

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December 11 2007

rockinblu
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I thought so too. But, I'm always wrong.

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December 11 2007

alias1
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You can say that again!!

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December 11 2007

Marci Reinheimer
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ROFLMAO

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December 11 2007

sunnyview
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I think you are both right. The plan does say that borrowers must live in their homes to qualify, but I am sure that many flippers were not entirely truthful on their mortgage applications to begin with. Most lenders charge a higher rate for non owner occupied loans and most do not follow up to make sure that the condition of occupancy is met. I wonder if the Feds running the bailout will check to see who's name appears on the utility bill before they freeze the rates for them?

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December 11 2007

sunnyview
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I would hate to see any hard earned tax dollars bailing out investors who took a chance at the wheel and lost. I feel strongly that the bailout plan has inherent problems that are being ignored.

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December 11 2007

Marci Reinheimer
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True, a lot of people "accidentally" forgot to check the box will not live in property.

I can't for the life of me see how this bail out is going to help. It's going to delay the inevitable and make the market suffer for longer.

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December 11 2007

Coconutcream
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It's not a tax payers bailout. The agreement is for lenders to simply freeze the rates for five years on some of the sub prime loans which are set to reset. What it really boils down to is the mortgage companies and banks agreeing not to be so greedy. Most of us, in fact, pay a much lower interest rate then the "teaser" rates the sub prime borrower got. The teaser rate for those borrowers are in the 7-8% rate and the resets would bump the rates as high in some cases as 13%. Yes, most should never have bought homes in the first place - but what's done is done and foreclosures hurt not only the homeowner who loses their home but the homeowners in the area who aren't sub prime borrowers and are not in danger of losing their homes simply because the value of their homes take a huge hit. You do not want t be living in a neighborhood or town with a bunch of foreclosures on the market.

Also, the program is voluntary. The banks do not have to do anything if they don't want, the freeze is only for 5 years and flippers aren't included.

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December 11 2007

brtlmj
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"Simply freezing rates" = "forgiving part of a loan". But yes, it is lender's own business what they do with their money, whether I like it or not.

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December 11 2007

eric obrecht, "buffalobyf"
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Lets see here:

Eligable people are those that have low credit score, who will be in over their head when the mortgage resets--THAT THEY KNEW AND AGREED TO-- and will thus be unable to pay.

UN-eligable people are thos with higher credit score (it is kinda hard to have a good score) and can afford the payment when it resets.

Whatever costs to the banks will be paid for my Gov bonds, which pay intrest to the buyer, with taxpayer (you and me) paying.

So, we are bailing stupid, unresponsible people out of something that they got themselves into; it really is that simple.

Flippers and others will be able to take advantage if they know what to say and do.

How about this scenario: Guy with low credit score facing reset sometime next year. He figures the reset, looks at income, and sees that he will be able to make payment. So, he goes out and gets a Benz and flat screen; suddenly he wont be able to make that payment after all. Now, he gets a freeze.

You are a fool if you think that people wont try to scam the system...

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December 12 2007

Roberto Ribas, "azrob"
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Roberto Ribas, "azrob"

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or someone renting a home suddenly moves into it to try to qualify... quits the second job that would have made making the payment possible, if his/her credit score is too high, late pays a few bills....

many aspects of this can be gamed all over the place... but it won't really matter to the crash in the long run...

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December 12 2007

Coconutcream
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Eric, and the bank foreclosing on these homes would be better for you - a taxpayer - how?

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December 12 2007

loanguy661
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All homeowners will pay the cost of this in the form of higher lending costs.

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December 12 2007

eric obrecht, "buffalobyf"
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eric obrecht, "buffalobyf"

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Eric, and the bank foreclosing on these homes would be better for you - a taxpayer - how?

The thing that you need to understand is that we have just experienced an unprecedented housing bubble. Bubbles pop, and when they do, its painful for everyone. But guess what, we need it. We desperately need a correction to obtain a sustainable economic trajectory, which of course is the opposite of what we just experieced.

So, banks that made high risk loans fail; and compaies that fed off the faarce, fail. Look, the economy will work itself out...bringing the gov into it this mess and you get taxes and ultimately failure.

Hillary and Obama have both said that the freeze does not go far enough. My God, if either of those two cannot grasp the fundamentals of this thing, and they get elected, we are truly in for some serious tax hits...to sustain the unsustainable.

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December 12 2007

Alisande
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Back in the day.. around 2000 when our area was first being developed investors were rubbing their hands together with glee. Housing was limited, this is a very tightly controlled growth area (there was almost NO rentals available). The houses were sold before they even had a sign in the yard. I know of one investor that bought 5 of the same house in one swoop. Then he promptly rented the houses to whomever (btw did I mention I HATE houses being rented??bah). He of course added no upgrades including no backyard landscaping. I think he sold most of them a couple years ago so I'm sure he made a mint. (The prices had more than doubled. A few even tripled in value.)

Now 7 years later the Federal Gov has stepped in and forced the city to build
a couple of apartment complexes. Thankfully, nowhere near me. Most of the flipper homes were sold thus removing most rentals (unfortunately, we do have some under foreclosure) I would like to see Zillow note that house xyz was sold under foreclosure. It makes a big difference in the zestimates for the rest of us. Since for the most part none of those homes had any upgrades and had not been maintained throughout their life.

I have a pretty low opinion of flippers..as I do with with Mortgage companies that doomed the poor saps that were really not ready to own a house. A pox upon them!!

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December 12 2007

Coconutcream
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"The thing that you need to understand is that we have just experienced an unprecedented housing bubble. Bubbles pop, and when they do, its painful for everyone. But guess what, we need it. We desperately need a correction to obtain a sustainable economic trajectory, which of course is the opposite of what we just experieced. "

I understand bubbles popping and I agree a correction is needed, but only a small portion of people are even eligible for the rate freeze - but I still contend that it is better for all of us to keep as many people in their homes then for the homes to go into foreclosure. The bubble would have popped regardless as prices simply got to high in relation to people's income.

"Hillary and Obama have both said that the freeze does not go far enough. My God, if either of those two cannot grasp the fundamentals of this thing, and they get elected, we are truly in for some serious tax hits...to sustain the unsustainable."

You are talking to the wrong person. I am a big believer that we are seriously under taxed in this country - especially the top 1%. I believe in gov't intervention in a whole host of areas. And we would be in for some serious tax hikes even if the housing and credit crisis never happened. We have to pay for this stoopid war Dubya and his friends got us into someday, you know.

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December 12 2007

eric obrecht, "buffalobyf"
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"I believe in gov't intervention in a whole host of areas"

So you drink the gov kool aid, do you? Sorry...but I have a very difficlut time stooping down to argue with people who believe that gov intervention (dem or rep) is a positive thing; there is too much evidence to the contrary--notwithstanding certain regulatory provisions.

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December 12 2007

SoCal BubbleBrain
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'btw did I mention I HATE houses being rented??bah"

' forced the city to build
a couple of apartment complexes. Thankfully, nowhere near me."

'Most of the flipper homes were sold thus removing most rentals'

'I have a pretty low opinion of flippers.'

And you seem to have a low opinion of renters. Is that a fair statement?

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December 12 2007

Angelique01
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I'm with Emily. Privatizing everything isn't working...especially the fire departments, owned by the insurance companies. Boy, did that turn out to be a nightmare. Though it may seem counter-intuitive, government intervention helps to stabilize the middle class.

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December 12 2007

7caves
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I'm not sure why "flippers" have a bad rep. First of all, I don't like the term
"flipper". I am a private investor who does this for a living, I put a LOT of
sweat into the place, as do my contractors. Every neighbor I have ever worked with on these places was happy to see me coming, as when we were done with a project it increased the value of THEIR properties, and our homes are always completed to specifications that I would be proud to live in them myself. We go through our homes and make them move-in ready at very affordable prices. Can't speak for other markets, but in Colorado Springs I believe we have a real value-added mission. I have many buyers who still keep in contact with me, and recommend our renovated homes to others.
Thanks,
Doug

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December 12 2007

Coconutcream
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"So you drink the gov kool aid, do you?"

Yeah, I only have a Masters in Public Policy from the University of Chicago so what the **** would I know.

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December 12 2007

Angelique01
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7Caves, the reason I don't like flippers is because they've artificially driven up the price of houses to unsustainable levels.

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December 12 2007

Callista, "warriorprincess"
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Callista, "warriorprincess"

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I don't like flippers because they're unnecessary in every way. Flippers don't do anything that a private owner couldn't have done themselves, unless they are;

1. a carpenter
2. a plumber
3. a professional landscaper

Otherwise they are unskilled middle men buying houses that *I* and others like me would preffer to buy and rennovate ourselves, to our own taste. ..just another added cost.

So 7caves...can YOU drywall? Do you replace plumbing? Do you install roofs? Can you remove lead paint or asbestose insulation? What exactly do you do that Joe homebuyer can't do for himself?

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December 13 2007

luckyme8890
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Successful flippers were investors who saw the housing opportunities early. They made money and are probably on the way to the next bubble. Unfortunately, I am not smart enough to spot it. I do not begrudge them. I do not feel sorry for the wannabes. The wreck might take 10 years to clear. This is the capitalist system.

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December 13 2007

Marci Reinheimer
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Callista, you and others like you make up a very small percentage of homebuyers. You wouldn't believe some of the looks I get when I take someone into a house with green shag carpeting, no dishwasher, old bathrooms, etc. Even if I pull up a corner and show them hardwoods underneath the carpet, they aren't impressed. Most people want the house done.

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December 13 2007

Callista, "warriorprincess"
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Marci,...I guess that may be the case...just doesn't make sense to me. Why pay a flipper a huge premium for a job you could have done yourself? Outdated places give you the chance to put in everything you want and still end up paying much less over-all....what''s the down side? The work I guess...

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December 13 2007

Marci Reinheimer
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I have only bought houses that needed work. It's a sick passion of mine. Even in a hot market, you could get a pretty good deal on the ugly duckling because nobody else wanted it.

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December 13 2007

sunnyview
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I LOVE ducklings, but Marci is right when she says that most people lack vision. Granted, the word "flipper" connotes free and easy money and most remodeling is actually work. Most true flippers I have met are not really remodelers or even investors. They tend to be property stackers who do not have much respect for either buyers or neighbors. They often lack real knowledge of both construction and RE investment. Overall, their work is shiny, slick and shoddy. They are not folks that you would ever recommend to friends to do work.

Remodelers actually give a crap about the finished product and tend to do one at a time or contract out their services while working on their own project concurrently. I do not have a problem with people who rehab properties, but I have no respect for people who have the flipper mentality and treat both buyers and neighbors as suckers to be kicked around.

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December 13 2007

colczak
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Callista,

It does not make sense to say you don't like flippers. Flippers can only make as much money as the market will bear. Flippers are essentially just investors who have two main risks: 1) unforseen property issues 2) slow or negative appreciation. Prior to the downturn in the market, the risks of flipping were mitigated by huge short term appreciation. Thus if you could get a fixer upper you could probably flip it for a profit which resulted in lots of flippers. Now that the market is in the s!@#$er, it takes alot of work to find a property to flip and then the risks often outweigh the rewards. So you see the low inventory and high volume of flippers was not due to flippers at all, but due to very high short term appreciation. If high inventory makes you happy, get set to be ecstatic!!

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December 13 2007

Callista, "warriorprincess"
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"So you see the low inventory and high volume of flippers was not due to flippers at all, but due to very high short term appreciation."

Let me fix that statement for you.

The very high short term appreciation was due to low inventory caused by the high volume of flippers.

There you go,...all fixed!

High inventory would make me ecstatic if the economic fallout caused by specuvestors wasn't likely to plunge us into a recession.

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December 14 2007

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