[quote=DomoArigato][quote=AN]
You fail to see that a move in ready house attracts a lot more buyers, which would drive up the price. So, it’s simply about supply and demand. Although it might be the exact same house, the condition is different, which would attract different amount of interests.[/quote]
Supply and demand has nothing to do with the housing market. This is because the government is currently backing 97% of all mortgages. Remove that support and then we could talk about supply and demand (at much lower prices).
Here’s what I suspect is really happening. The banks can’t afford to put any money into their housing inventory because they don’t have any real money. All they have is an inflated mark on their balance sheet for each house. They are willing to sell their inventory at whatever price they can get because the government/taxpayers will cover their loss.
So the banks have a bunch of houses that can’t pass inspection and which they don’t want to put any money into. The banks are willing to sell at close to the real market price (i.e., what the house would sell for without the massive amount of govt/taxpayer support) to all-cash buyers who don’t have to worry about inspections.
The all-cash buyers then fix up the house so that it can pass inspection and then flip it back to the government via an FHA borrower who puts 3.5% down. The process then starts all over again with 50% of FHA FBs getting foreclosed upon within two years and the house going back to a bank.
So what we have is some type of massive, circular Ponzi scheme financed by the government/taxpayers that looks something like this:
bank-owned–>all-cash-buyer–>govt-backed-FB–>foreclosed-back-to-bank
The idea that there is this pool of frivolous borrowers out there who are waiting for the perfectly fixed up house is poppycock. The fact is that the government-backed FBs can’t get through the paperwork/inspections fast enough to beat the all-cash buyer. Further, the banks don’t care what price they get as the taxpayers are covering their losses.
It’s a huge shit sandwich and we are all taking a bite through continuous, forced taxpayer-financed bank bailouts.[/quote]
That’s EXACTLY what I mean by supply and demand. I don’t care why the bank didn’t fix up the house. The point is, they are not fixing it up. Fixers have less demand vs the same house in turn key condition. The larger the buyer pools = the more demand for the exact same house. There are people who don’t have cash/time to do remodel, there are people who won’t qualify for a loan to buy a fixer, there are people who just don’t like dealing with remodel. Those are people who would increase the buyers pool for turn key but reduce the buyer pool for the fixer.
