I side emotionally with CAR and jpinpb. The low end zips I follow have significant numbers of “newly rehabbed” overpriced homes. There are fewer REOs compared to a year ago and it does seem easy to blame flippers for sucking up the supply. For one reason or another the REOs just aren’t making the MLS like they used to. This corresponds to the past year’s significant rise in prices. Mostly I see some short sales, a few REOs (which will probably have to end up cash only or 203k), and a lot of flips.
I am not against the wholesale market for homes but I would be totally out of my element among rehabbers and real estate pros at the auctions. So I sit on the sidelines waiting for the current manufactured demand spike to subside.
Since I am looking at the low end I can positively state the FHA buyer is absolutely who is targeted by the flippers. Again, it appears to be all cash or FHA at the low end and not a lot of middle ground for the significant down payment crowd. I see the issue as a 2 sided coin. FHA easy terms and the tax credit provide the access to money/demand. Flippers provide the supply. Most REOs won’t meet government lending guidelines so flippers don’t compete directly with the government money. For a short time before the government stepped in, and as lending was contracting, organic buyers could get REOs on the open market for much less than today.
Flippers need someone to flip to. At the low end most buyers don’t have any money unless government provides it. Absent government induced demand, organic 20% down buyers would be competing with rental investors.
