Tuesday, April 19, 2011
This past Sunday's Chicago Tribune "Money and Real Estate" section had an article on how house flippers have changed tactics.
During the bubble, they loaded up on easy credit, bought at high prices, did complete renovations, and carried the properties for a few months before trying to sell at higher prices.
Now, house flippers try to acquire homes cheaply - frequently from foreclosure auctions, use cash, make minor changes (such as painting or landscaping), and try to sell the properties quickly. The idea is they make less per property, but flip more per year.
Some of the flippers interviewed must have felt that people will think they are profiting by taking advantage of people losing their homes, so they offered a good defense of what they are doing.
I think this description also describes the value that stock market speculators create:
"Some people's bad fortune is other people's opportunity. I know it sounds callous...but I also feel like we provide a backstop to the market."
"Anyone who depletes the foreclosure inventory is helping the marketplace because we will not see appreciation or increases in value until foreclosures go away."