[quote=CA renter]
No, I didn’t go to the auction because I had not been following the trustee sales closely. Again, the flippers are there en masse. What would TS prices look like if there were no flippers at the auctions?
What would prices look like if there were no flippers in the market sucking up inventory and sitting on it at very inflated prices?
See, there are smart buyers who don’t want to give flippers a profit, but there are enough foolish buyers in this supply-constrained market who will bid the asking price on a flipper’s property. So, while “the market” (buyers?) sets the price, it is the most foolish buyer who’s willing to take the greatest risks who sets the price in a supply-constrained market.
Yes, flippers absolutely affect prices because they remove supply at a certain price and add it back (slowly, if prices are not working in their favor) at a much higher price.
Flippers are willing to pay more than o/o buyers because they are gambling on the FHA buyers who are willing to overpay and who will likely be in foreclosure within the next five years. For the more conservative buyers like us who have good credit and a large downpayment to lose, we’re not banking on rising prices; we’re making allowances for wage cuts and extended periods of unemployment and pension cuts. It’s a very different mindset.
If we had a market where the only bidders were organic (owner-occupier) buyers with a minimum 20% down and 28% DTI ratios (which should be the max DTI ratio on *after tax* income — the original ratio was made for better times; we all need to be more realisic about deflationary trends and a very different job market going forward), I think prices would be much lower than they are today. Add to that the supply that is being held off the market by lenders and the govt, and prices would probably be 20-30% lower *even in the “sacred” NCC areas.* Imagine what prices would do if we also allowed interest rates to float freely and if the govt stayed out of the mortgage market! (I can dream, can’t I?) 😉
If we had done things my way, there never would have been a foreclosure “crisis.”[/quote]
Thank you for clearly stating my sentiments. I can’t even get my own thoughts out of my head to write them down. You’re doing a great job at it!
