A lot of folks found themselves caught up in the house buying madness at the peak of the market. They bought too high and found themselves in foreclosure. Speculators moved in to buy those foreclosures and guess what? A lot of them bought too high, and the cycle began again:
By 2006, it was clear the Phoenix real estate bubble had burst. That’s when both tract homes in the exurbs of Maricopa County and high-end condos in Paradise Valley began falling into foreclosure. And as prices dropped, homeowners panicked and unloaded their properties.
Yet those who jumped back in during 2007 badly mistimed the bottom. Phoenix prices are down 20 percent this year, according to the National Association of Realtors (NAR). The result? That second wave of speculation has resulted in scads of newly trapped homeowners.
"The same speculators that were partly responsible for the housing bubble and its subsequent popping are the same ones that are trying to replicate the 2003 [through] 2006 period," says Anthony Sanders, a professor of finance at Arizona State University. "As the housing market seeks a bottom, speculators and some well-funded hedge funds are jumping in the market but finding that the bottom hasn’t been hit yet. Hence, they jump back out again."
This type of scenario is playing out nationwide. Homeowners selling their properties after less than a year now represent 17.3 percent of total sales in the U.S., reports Zillow.com. This is higher than at any point during the housing boom, back when many people were avidly flipping homes for profit.
I’ve seen all kinds of articles saying how now that prices are so much lower than the peak, this must be close to the bottom and a good time to buy. The reality is, as long as inventories are high, demand is low, credit is tight and the economy is weakening, there is going to be downward pressure on prices. If you aren’t in a position to hold a property long term or have positive cash flow, you could end up in trouble.
It’s tough to flip a property for more money in a short time frame in an environment where prices are falling- even for the experts. The best way I can see to make money off of foreclosures at the moment is to hold seminars on how to make money off of foreclosures.
I wonder if the name "Falling Knife Investments, L.L.C." is available?
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That would be a great name. In Las Vegas and I’m sure in Phoenix, speculators had a cult mentality. Now the misery that has been brought upon us can be traced back to that type of mentality. Didn’t this happen under Barney Frank’s watch? Now this clown wants to give billions to the auto industry. A coup de barney. Igor thinks that would be lame.