The explosion in the debt/GDP ration during the '30's was a result of the crash in GDP. We may well see that in coming years but so far we have not seen that. You are presenting a chart of then without the comparison chart of now. If you had a current chart you would see that there is no similarity. It looks to me that the Bush/Obama strategy of recharging the economy by using massive government borrowing to spend and lend has in fact had many of the desired SHORT TERM effects. The piper will be paid. But not in 2010 and probably not in 2011 either. And the form of payment could just as easily be currency debasement as deflation. If you set out to prove a hypothesis you should actually think about whether what you are posting proves it. In this case you prove nothing. You assert but then stop.
Sooo that being the case then why are these flippers running to the market to flip yet again if millions and millions can't receive the financing to buy all these houses these flippers are trying to sell to the general population. Before anyone could buy a house, now only people with really good assets and or all cash deals are accepted. Who are these flippers going to sell to? Other flippers??? In the story 2 guys pay $180,000, slap some new Lowes grade savings special paint on the walls and add some home depot carpet special and throw it on the market for $230,000. $50,000 more. This pushes prices up around the neighborhood pushing potental buyers who could only afford a house under $200,000 out of the market.
I believe it is an artificially inflated housing market based on the government funding. Yes, a dead cat bounce. As stated earlier, the "pros" are taking advantage of their window. They still buy right. Always the key. They also have very niche farmed areas and the newbies are much fewer and far between
I agree 100%. Who cares if they flip or not. It is neither good or bad for the market it is simply a facet of the market.
I am no ant-flipping. I am anti-speculation. Way way way back when real investor flippers did exist. They bought under valued homes, fixed them up over a number of months and then sold them on the market. When these homes were fixed up they were REALLY fixed up, meaning the house was usually gutted and renovated. Now what you have are people too lazy to go to the house who buy and sell a house and expect about 20% returns! Yeah that is healthy for the market! Don't you find it funny that a person can earn 14 dollars an hour doing nothing more than looking at a house and saying, "check it exists..." The problem is that this sector is yet again the sector that is going to drive the entire real estate market nuts! I am thinking they want flippers because they are the carrot where people will become irrational again. However, I am tempted to believe that it will not work because people can't afford homes yet again. Interestingly America is turning into the European society. In Europe most people rent. Very few buy... People cannot afford it.
There are many tricks to the trade. Some of these flippers are doing a "Rent to own" deal for people with poor credit. The buyer puts down like 2-5k under a land contract and after a year or 2 of payments can then "refi" the house and cash out the flipper(if the property doesnt go down anymore.) Flippers also can sell to people with good credit like this, then sell the note to a note buyer for 90-95 cents on the dollar and cash out that way too. I also think 50k is too thin a margin on a property like that. They are only trying to make about 25% on that deal and they lose 1% per month in holding costs. Not really worth the stress. If I cant buy a house for 50% or less of market value, I walk away, but generally the cheaper houses have huge competition of amatuers willing to pay top dollar. A year or so ago, I was looking at a house that was worth about 90k MV. It needed about 35k worth of work, so I offered 35k which would've given me a 20kprofit. But there were 4 other offers when I made my offer. Some for over 70k. There was foundation issues plus other stuff that HAD to be fixed so these people were looking at very little profit unless they bought and just flipped to a "sucker"
Doesn't this statement take it two steps beyond craziness. I am no "free market" extremist. I believe we do need an FDA to approve new drugs and airline safety needs some government supervision but if people want to buy and sell things, fix them up or not ... WHY DO WE CARE?
I have an LLC client that "flips" homes in NoRCAL; this is a tricky business at the moment and many novice flippers have been rolled over in this real estate market. To the extent possible, I've been recommending holding on to these properties for three to five years and drawing rental income. The ROI is much better than with a CD or bond and by waiting to sell out, there is more time to allow this market to heal. FWIW, one of the largest REO brokers in NorCAL has made it abundantly clear, that the banks are sitting on thousands of properties that have not been released to the market. This attempt to control supply coupled with artificial government stimulus in the form of various tax rebates is helping to prop up this market. My concern is that commercial lending losses may force these lenders to release additional properties back onto the market disrupting the current tenuous balance of supply and demand. Caveat emptor