Are the Flippers Laying In Wait?

[CricketOnTheHearth]

We like to gloat over the “flopped flippers” who find themselves high and dry with an overpriced house they can’t sell, but there has to be some number who successfully sold at or near the peak and then stayed out of the market for a while. These will be sitting on wads of cash, unless they lost it in the stock market in late 2008. In fact, I think we are seeing some of them now, coming out of the woodwork this summer to snatch the low-priced, now-affordable homes out of the grasp of poor schmoes who were just trying to buy a place of their own to live in at long last.

I’ve been looking over a number of places to rent, and found that most of them seem to be owned by people who bought them to rent and have never lived in them. It makes me wonder how much of the housing stock out there is in the hands of people like these, who own 2 and 3 and even 10 properties, and rent them out, often to the selfsame people who would rather buy their own if they could only have a chance. Has it always been this way in Southern California or is this a new trend? It seemed to me very scarce back in my home town in the MidWest, where most people owned their own homes and those who rented, lived in apartment complexes.

So when the rest of the market bottoms, will more of these so-called “investors” be jumping in there, with their all-cash offers, punking those of us who want to buy a place to live in, and forcing us to miss our chance and be renters forevermore?

Or will the idea of buy-to-rent-out be thwarted by the current conditions in the rental market? As Calculated Risk points out periodically, vacancy rates have been climbing all over the country, including here, and it is forcing many landlords to lower their rents slightly. Mr. Mortgage or Dr Housing Bubble (I forget which) poo-poo’d the idea of the banks renting their REOs out for this reason, saying the banks would be renting into a renter’s market and creating even more of an oversupply of rental property than there is already. Certainly one by-product of the sucky economy and high unemployment is that people (such as myself) will be moving in with roomates and sharing rent, thus opening up more vacant spaces in the rental market.

Also due to the sucky economy, some 9% of the Mexican immigrants in SD County have left— out of 300+ thousand total, this represents a decrease of about 1% of the county’s total population. I think these workers were pretty robust at propping up rental rates, too. As a friend of mine from Poway once commented, “landlords love them, because they’re quiet and pay their rent” and with 10 or 12 to a house, each sees a rental hit of only a couple hundred dollars a month. When 10 people can team up this way to rent a house for $2400 or $2600 a month, this puts upward pressure on rents. But now their jobs are drying up, and apparently some are leaving in search of greener pastures, or just home.

This week I looked at a condo for which an ad has been posted on the mailboxes of the complex for weeks, asking $1540/month rent. Seeing the ad being there so long, just for grins I called the owner up and offered $1400/month. To my surprise, they showed interest in going as low as $1450. When I looked the unit up on Zillow, I found that they had bought it in 2003 for $270,000– meaning with HOA and taxes, they need that $1540 to break even with rent-equivalent and at $1450, would be slightly “underwater”. (Not necessarily in actual-cash-flow terms, that would depend on whatever down payment they used.) Similarly, one of the apartment complexes in the area has been offering rent specials as low as $1350/month on Craigslist (the manager was rather rude to me, though, so I don’t plan to give them my business). This also implies to me some weakness in the rental market right now.

So what do you think? Will flippers come out later on and battle with those of us who are just trying to buy a place to live in, or will the market fundamentals discourage them?

[patb]

weak price growth and rising unemployment vitiates against
flipping.

sure if you see a really cool warehouse and you want to put in
lofts sure, but expect it to sell at 200+/SF not 500+

sure foreclosed propertes that need some clean up you can
burnish and sell but the market is moving slow

[patb]

weak price growth and rising unemployment vitiates against
flipping.

sure if you see a really cool warehouse and you want to put in
lofts sure, but expect it to sell at 200+/SF not 500+

sure foreclosed propertes that need some clean up you can
burnish and sell but the market is moving slow

[patb]

weak price growth and rising unemployment vitiates against
flipping.

sure if you see a really cool warehouse and you want to put in
lofts sure, but expect it to sell at 200+/SF not 500+

sure foreclosed propertes that need some clean up you can
burnish and sell but the market is moving slow

[patb]

weak price growth and rising unemployment vitiates against
flipping.

sure if you see a really cool warehouse and you want to put in
lofts sure, but expect it to sell at 200+/SF not 500+

sure foreclosed propertes that need some clean up you can
burnish and sell but the market is moving slow

[patb]

weak price growth and rising unemployment vitiates against
flipping.

sure if you see a really cool warehouse and you want to put in
lofts sure, but expect it to sell at 200+/SF not 500+

sure foreclosed propertes that need some clean up you can
burnish and sell but the market is moving slow

[CA renter]

The flippers/speculators have been out there in large numbers over the past year. We saw them coming back into the market in February of **2008**.

Yes, what you’re worrying about has already been happening. This is where many of these “all cash” offers are coming from.

Though I’m a housing bear right now, and don’t like programs that subsidize housing purchases for the poor (especially low down payment programs, and gimmicky interest rate mortgages), I DO believe home ownership should be a goal, as it does create more stable communities, and it can indeed provide a more stable living situation for many families. If the govt truly believed in affordable home ownership, they would eliminate Prop 13 protection for investment properties and second homes (possible exemptions for multi-family dwellings designed as rentals, and for SFHs that agree to rent control laws). Also, I would eliminate the ability to deduct mortgage interest and property taxes on rentals (but with the same exemptions as above).

There is no need for taxpayers to subsidize a landlord’s profits, and that’s what’s happening with both Prop 13 and MID and property tax deductions.

[CA renter]

The flippers/speculators have been out there in large numbers over the past year. We saw them coming back into the market in February of **2008**.

Yes, what you’re worrying about has already been happening. This is where many of these “all cash” offers are coming from.

Though I’m a housing bear right now, and don’t like programs that subsidize housing purchases for the poor (especially low down payment programs, and gimmicky interest rate mortgages), I DO believe home ownership should be a goal, as it does create more stable communities, and it can indeed provide a more stable living situation for many families. If the govt truly believed in affordable home ownership, they would eliminate Prop 13 protection for investment properties and second homes (possible exemptions for multi-family dwellings designed as rentals, and for SFHs that agree to rent control laws). Also, I would eliminate the ability to deduct mortgage interest and property taxes on rentals (but with the same exemptions as above).

There is no need for taxpayers to subsidize a landlord’s profits, and that’s what’s happening with both Prop 13 and MID and property tax deductions.

[CA renter]

The flippers/speculators have been out there in large numbers over the past year. We saw them coming back into the market in February of **2008**.

Yes, what you’re worrying about has already been happening. This is where many of these “all cash” offers are coming from.

Though I’m a housing bear right now, and don’t like programs that subsidize housing purchases for the poor (especially low down payment programs, and gimmicky interest rate mortgages), I DO believe home ownership should be a goal, as it does create more stable communities, and it can indeed provide a more stable living situation for many families. If the govt truly believed in affordable home ownership, they would eliminate Prop 13 protection for investment properties and second homes (possible exemptions for multi-family dwellings designed as rentals, and for SFHs that agree to rent control laws). Also, I would eliminate the ability to deduct mortgage interest and property taxes on rentals (but with the same exemptions as above).

There is no need for taxpayers to subsidize a landlord’s profits, and that’s what’s happening with both Prop 13 and MID and property tax deductions.

[CA renter]

The flippers/speculators have been out there in large numbers over the past year. We saw them coming back into the market in February of **2008**.

Yes, what you’re worrying about has already been happening. This is where many of these “all cash” offers are coming from.

Though I’m a housing bear right now, and don’t like programs that subsidize housing purchases for the poor (especially low down payment programs, and gimmicky interest rate mortgages), I DO believe home ownership should be a goal, as it does create more stable communities, and it can indeed provide a more stable living situation for many families. If the govt truly believed in affordable home ownership, they would eliminate Prop 13 protection for investment properties and second homes (possible exemptions for multi-family dwellings designed as rentals, and for SFHs that agree to rent control laws). Also, I would eliminate the ability to deduct mortgage interest and property taxes on rentals (but with the same exemptions as above).

There is no need for taxpayers to subsidize a landlord’s profits, and that’s what’s happening with both Prop 13 and MID and property tax deductions.

[CA renter]

The flippers/speculators have been out there in large numbers over the past year. We saw them coming back into the market in February of **2008**.

Yes, what you’re worrying about has already been happening. This is where many of these “all cash” offers are coming from.

Though I’m a housing bear right now, and don’t like programs that subsidize housing purchases for the poor (especially low down payment programs, and gimmicky interest rate mortgages), I DO believe home ownership should be a goal, as it does create more stable communities, and it can indeed provide a more stable living situation for many families. If the govt truly believed in affordable home ownership, they would eliminate Prop 13 protection for investment properties and second homes (possible exemptions for multi-family dwellings designed as rentals, and for SFHs that agree to rent control laws). Also, I would eliminate the ability to deduct mortgage interest and property taxes on rentals (but with the same exemptions as above).

There is no need for taxpayers to subsidize a landlord’s profits, and that’s what’s happening with both Prop 13 and MID and property tax deductions.

[jimmyle]

My aunt bought 5 SFHs in the last two years with positive cash flow after taking in the rent, and paying tax. However, she is in for the long term. Not flipping.

[jimmyle]

My aunt bought 5 SFHs in the last two years with positive cash flow after taking in the rent, and paying tax. However, she is in for the long term. Not flipping.

[jimmyle]

My aunt bought 5 SFHs in the last two years with positive cash flow after taking in the rent, and paying tax. However, she is in for the long term. Not flipping.

[jimmyle]

My aunt bought 5 SFHs in the last two years with positive cash flow after taking in the rent, and paying tax. However, she is in for the long term. Not flipping.

[Author]

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