NEW! CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Wednesday, January 20, 2010

Investors Flipping Out

by Calculated Risk on 1/20/2010 01:20:00 AM

Robert Selna at the San Francisco Chronicle discusses the surge in investor buying at the Court House steps, and the changes to the FHA rules that allow the resale of homes in less than 90 days (see HUD Changes FHA Rule for Flipping).

From the Chronicle: Investors dominate home flipping, auctions

House flipping, a quick-buck scheme pursued by amateurs and professionals alike during the real estate boom, now is dominated by investors willing to pay all cash, who troll auctions for foreclosures that banks are gradually trying to siphon off their books.
...
The figures, from research firm ForeclosureRadar.com in Discovery Bay, ... indicate that at December Bay Area auctions, about 2o percent of the sales went to investors rather than back to foreclosing lenders. In December 2008, that number was 3.2 percent.
...
Previously, the FHA refused to provide mortgage insurance for homes resold within 90 days to prevent fraud. A common scam was for investors to purchase a house, make minor repairs and sell it to a straw buyer who never planned to pay off their loan.

That kind of ploy artificially ramped up housing prices, left the FHA with inflated insurance claims, and made for vacant and blighted housing.

The FHA rule reversal is scheduled to last for one year starting Feb. 1 and includes some limited safeguards.
Flipping to FHA buyers - all the cool kids are doing it!