Locally, housing has still gone up here. The house built next door to us is 500 square feet less on a much smaller lot and has an asking price only 2000 less than what we paid. I estimate, from current asking prices of similar homes, we gained 10% in appreciation alone.

Very interesting, Lash, thats a great explanation, thank you for confirming my suspicions. I do have a lot of respect for "flippers" that truly know what they are doing, but having every Tom, Dick and Harry walking away with thousands upon thousands and squandering the profits could only go on for so long. Its incredible to see the overall impact of this pattern.

It would have been nice to see those dollars invested properly afterwards. I'm sure some savvy people did that, and I'm sure a lot didn't.

Its unfortunate that those who really need a home or need to sell a home are suffering now.

It'* true that there are still some growing areas of the country that did not experience the market overheating and still have a shortage in available housing inventory.

Unfortunately housing is not a readily moveable commodity...

Thanks for posting that, lash. Yes, very good explination. The issue isn't just with sub-prime mortgages. A lot of what'* driving the problem is the greed of the homeowners and the lending institutions. People would cash out refinance after cash out refinance.

As a real estate investor in the State of Michigan, that'* the story on nearly every street corner. Luckily, for REIs it'* a sea of homes to choose from. Just last week I bought a bank-foreclosed condo for 40% of the value of the comparable condos in the complex. I already got it ready to be rented and am in the process of screening tenants. When the market does come back (projected mid-2009 for MI) it will pay off.

If you ever wanted to jump into the market, now'* the time. Phenominal selection, excellent prices, and very attactive interest rates on 15 and 30 year fixed loans.

So I guess finally we get a break in the pathetic TV programming based on home flipping like Property Ladder, Flip this House and Pimp my Crib etc will go away.

Dare I say...can we blame TV as a part of this problem?!

Mark....I was waiting for you to chip in, knowing you are a real estate investor. Your target market has changed to rental tenants as opposed to buyers now?

I'm with Mark on this. Down here, it is also a buyers market and the right time to buy for investment. To answer your question, Jim, right now is the time to buy and rent, while waiting for the market to recover. Then you sell again.

The rentals are about covering costs while your equity gains value.

I myself am looking at an undervalued property near me on a lake. It is currently listed for less than the county assed value! That is unheard of in normal markets down here. A similar, but smaller house two houses down sold for almost double in late 2005.

Investors with a longer term outlook and the patience to wait for a market recovery will do well.

Hammer, meet nail.


I believe this to be part of the case, as more people started seeing this as the market was starting to turn. I believe that it actually allowed the market to sustain itself some from the initial downturn as the influx of money from the "newbie" hung onto it, but it is these people who, when they couldn't flip them cause of the current prices, had to foreclose.

Since 2005 our target has been to buy, buy, buy IF the deal is right. By the right deal, I mean right price, right area, and right terms. You make your money when you buy.

Since the market is down, we're buying in good areas that will at least sustain their value for a couple years. While we're holding them, we're doing minimal rehab and renting them out. Then, when/if the market turns, we'll resell them. This way you make money incrementally (month to month) AND with the equity when you sell. Plus, by keeping them for more than one year (in the US), you don't have to pay the short-term capital gains of 25%. It qualifies as a long-term capital gain for only 15%.

I'll share my situation.

I purchased my condo at a price of $20 000 under value at the time in February 2005. It should have cost me $174 000, it cost me a bargain $154 900. Since then, the market value for comparables in my building on my floor (sub penthouse) is 189 000 to 191 000 with minimal upgrades. The hope is to sell in 3 or 4 years make a tidy $45 000 to $50 000 profit to put down and build a home for a family.

We'll see how that goes. The markets around here have grown due to an influx in population and the part that scares me is not white collar home flippers but new products being introduced by charter banks offering zero down upwards of 35+ year amortization. This is great for first time buyers, but its encouraging escalating prices. Any serious market change that forces a rise in interest rates....even after locking in for 5 years, once that mortgage is up, these people can't afford a 1 or 2% increase on the rate when you have a $600 000 mortgage.

I think a mortgage is something you have to earn, and be able to contribute to before buying a home, not giving out $0 down handouts.