House Flippers Impacted Current Denver Home Prices

By
Real Estate Agent with Denver Homes - The Bandy Team - Keller Williams Park Meadows

House InvestorsIf you thought you knew all the reasons why your Denver home has lost value, think again. As the Government continues to investigate the recent housing crisis, they have discovered something rather interesting. A report by the Federal Reserve Bank of New York shows that speculative real estate investors, commonly known as “house flippers,” may have had a larger impact than first thought in the housing bubble that helped create our current economic mess.

 

When down payments were low, house flippers used subprime credit and relaxed lending requirements to purchase multiple properties in Denver and throughout the country. More than one-third of home mortgages in 2006 were obtained by those who already owned at least one house. In fact, the fastest growing segment of U.S. homeowners between 2000 and 2006 were those owning three or more properties. This buying spree caused prices of owner-occupied single family homes to more than double from 2000 to 2006, particularly in Arizona, California, Florida and Nevada.

 

However, when home values began dropping, the house flippers began to default in record numbers. In 2006, more than 25 percent of extremely delinquent mortgages in the U.S. were held by multi-home investors. U.S. home values then plummeted below homeowners’ original purchase prices, leading to myriad foreclosures because folks couldn’t—or wouldn’t—pay their underwater mortgages. Residential home construction also fell off at this time causing high unemployment among construction workers.

 

To prevent future housing bubbles and their disastrous results, the report states that speculative borrowing must be limited by higher down-payments and higher mortgage rates for investment homes. The questionable lending practices of the time made it very easy for house flippers to buy numerous homes, and they simply took advantage of a great opportunity—but no one was minding the store and the result was a huge negative hit to the economy.

 

Tougher lending requirements along with serious cash investors are helping the hardest-hit states to recover little by little. Hopefully this will work its way into the overall economy to help homes in Denver and across the U.S. to recover their value.

 

Let the professionals at the Bandy Team help you buy or sell a Denver home, contact us for a no-obligation consultation. If you’re thinking about buying a home in Denver, we can show you some terrific properties in Denver, including homes in Denver Highlands and real estate in Washington Park (also known as Wash Park). You may also be interested in horse property in Franktown or homes in Parker, including a wide variety of homes in Canterberry and real estate in Stonegate.

 

Marianne Bandy

 

Denver Relocation

 

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Rainmaker
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Marnie Matarese
J Wood Realty - Sarasota, FL
Showing you the best of Sarasota!

We suffered through a huge flipping scandal here in Sarasota.  Now, years later the major participants are finally going on trial and jail time is expected for many of them.  Within the close-knit group, a single home would change hands 4 and 5 times with the value being inflated hugely with each sale.  All those homes have now been either short-sold or are bank-owned leaving a blight in their neighborhoods and property values decimated.

Dec 22, 2011 08:02 AM #1
Anonymous
Doug

This is a very interesting post, Marianne. I am sure there are a number of causes for the bursting bubble and house flipping scenarios as shared by Marnie didn't help. BUT... imho, the banks & government are the primary cause of this burst bubble. At the same time markets are what markets are. They go up and they go down. Clearly 75% of seriously deliquent mortgages are from those that own less than 2 homes and a great quantity of them should never have been given a mortgage in the first place. Then there were others that fueled the McMansion fire and bought more house than was prudent for them. Again, the banks are the culprits for issuing interest only notes and notes that would cause people to be in roughly 50% total indebtedness. On top of that are we really to believe anything the Federal Reserve has to say?

Dec 22, 2011 08:20 AM #2
Rainmaker
241,725
Doug Dawes
Coldwell Banker Residential Brokerage - Georgetown, MA
Your Personal Realtor

I'm going to try this again. Somehow I got bounced out of AR while writing my reply.

 

This is a very interesting post, Marianne. I am sure there are a number of causes for the bursting bubble and house flipping scenarios as shared by Marnie didn't help. BUT... imho, the banks & government are the primary cause of this burst bubble. At the same time markets are what markets are. They go up and they go down. Clearly 75% of seriously deliquent mortgages are from those that own less than 2 homes and a great quantity of them should never have been given a mortgage in the first place. Then there were others that fueled the McMansion fire and bought more house than was prudent for them. Again, the banks are the culprits for issuing interest only notes and notes that would cause people to be in roughly 50% total indebtedness. On top of that are we really to believe anything the Federal Reserve has to say? So, there are many reasons why prices have adjusted from the highs. Investors are one, government is another, banks are a third, greed makes the list, out and out fraud is on it too and don't forget MERS.

Dec 22, 2011 08:26 AM #3
Rainer
135,385
Jon Eliason ~ Independent ~ REALTOR®
Independent Broker Pagosa Springs, Colorado - Pagosa Springs, CO
Jon Eliason

Marianne ~ I like this post. There seems to be many factors involved with the Housing Crash of '07-09. I see different opinions on several subjects and I take it all in because there are some very good points. The Lending Institutions and  Flippers, certainly didn't help. I can only hope that in the future, people can look back to the previous decade and take note of the inappropriate decisions made and the ramifications that followed. They say Hindsight is 20/20, I'll keep my fingers crossed.

Dec 22, 2011 08:41 AM #4
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Rainmaker
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Marianne Bandy

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