How I Made A Fortune In The Phoenix Real Estate Boom, Then Gave it All Back in the Bust

Lenders foreclosed on tens of thousands of families.

A Decade After The Bubble Burst, House Flipping Is On The Rise

A southbound view of new development in Ahwatukee, part of the Phoenix metro area. To Rosin, the wave of foreclosures meant that there were thousands of houses on the market that needed only a face-lift to net her a tidy profit. Ten years into her career flipping houses, Rosin's operation is much more streamlined and professional. But it's harder to make money now, she says. Her profit margins are significantly thinner, typically 10 to 15 percent of the eventual sales price. She has to know exactly which amenities will yield more profit and which to skip, and the fine line between upgrading and going overboard.

New doors are lined up for installation in one of Pickett and Rosin's Phoenix properties. These days, profits are tight, and they face stiff competition. New research and data suggest that the practices of house flippers fed the bubble of the early s. Much of the blame for the housing crash has fallen on subprime borrowers and people who bought and lived in homes they couldn't afford. But researchers are now coming to understand that a big part of the problem was people with better-than-average credit scores who owned multiple homes — not subprime buyers, but real estate investors, landlords and flippers.

Stefania Albanesi, an economist at the University of Pittsburgh, argues that the rise in mortgage defaults during the housing crash was mostly attributable to real estate investors , including flippers. During the bubble, about two-thirds of home flips nationwide were financed with loans, according Attom. In places like Phoenix and Florida, that number approached 80 percent.

Contractors apply stucco to the exterior of a home being renovated by Rosin and Pickett. Still, it's harder to make money. The problem with that, Albanesi says, is that real estate investors such as flippers are at greater risk of defaulting on their mortgages than normal homeowners. Overall, their default probability is much greater. Normally, people with above-average credit scores are unlikely to default on their mortgages.

But during the crisis, Albanesi's research shows, it was borrowers with good credit scores who had taken out mortgages on additional properties — mostly investors — who defaulted at historically high rates. Researchers are now coming to understand that a big part of the problem was people with better-than-average credit scores who owned multiple homes — not subprime buyers, but landlords and flippers.

A Decade After The Bubble Burst, House Flipping Is On The Rise | WBUR News

They have higher interest rates. And so, other things equal, it's more likely that these borrowers might default. Despite the volatility they can bring to a market, flippers can and do bring value. Many homebuyers don't have the energy, resources or know-how to renovate a home that needs it.

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Flippers can help boost the supply of "move-in ready" homes. I take my son on fishing trips up to British Columbia. I've done enough for them. If they get anything out of us, it's just a bonus. Don't count on it. Next day I'm driving around the nicest parts of Sun City with realtor Renee Chipules, trying to get a feel for what's out there.

One reason for that we already know: Sun City doesn't have nearly as many foreclosures, which tempt investors and first-time homebuyers with irresistible discounts and are fueling a sharp rebound in sales in some parts of the country.

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But there's also the ripple effect. No one has to move to a retirement community; when people can't sell their houses back home, they tend to stay put. Now they're waiting for their homes to sell before plunking down for another. Chipules and other realtors I spoke to think there's a huge, pent-up demand for retirement homes.

Once the market recovers nationally, the argument goes, Sun City and other places like it will get a big bump, especially as the coming wave of baby boomers starts to retire. Chipules shows me three houses - similar sizes about 3, square feet , similar layouts two or three bedrooms, all on one floor , similar amenities marble everywhere, hot tubs, curved-glass showers , all of them situated directly on or within sight of a golf course.

But the asking prices are all over the map: Well, for the one in Grand, it could be the fairway view; it truly is spectacular. The one in Corte Bella? Possibly it's overpriced, even fully furnished. Not likely, says Brenna: A bargain, Chipules believes.

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Priced to sell at two-thirds of its peak value in late But the current owner was there long before the big run-up in prices; she's got other houses, and she just wants her equity. Sure enough, after 12 days on the market, she gets an offer at asking price, sale pending. All of this, says Chipules, is evidence of a turbulent and inefficient market. No one really knows what anything is worth anymore. Some sellers appear to be kidding themselves, even now, though a patient, sober buyer will indeed find bargains, even screamers. Heirs are motivated sellers. Says resident Tom Mays: But don't get too excited.

Excitement is over in real estate. On the other hand, if you're thinking about moving soon to Sun City or someplace like it, you're in luck. You won't have any trouble finding a terrific house, and it shouldn't cost you nearly as much as it would have just a couple of years ago. By David Whitford , editor-at-large.

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The fight over the cholesterol medication is keeping a generic version from hitting the market. What about al Qaeda's finances? Bin Laden may be dead, but the terrorist group he led doesn't need his money. His only regret is that he didn't move to Sun City 10 years earlier.

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They go out in a bottle. According to the latest MLS data, Sun City, while definitely hurting, is a lot better off than its neighbors. What's killing Maricopa County is foreclosures. Even as home sales rise, cheap, bank-owned properties are flooding the market: Foreclosures during the same month in Sun City? Fewer foreclosures equals greater stability. It's a pattern that seems to play out nationally.

While there's been little research on how retirement markets have fared specifically, experts say that the same profile - minimal foreclosures, less severe price drops - is true of retirement communities across the country for more examples, see our gallery of deals across the nation. Says Bill Ness, founder of the retirement website 55places. There could be a simple explanation for this: Old people aren't as stupid and greedy as young people are. Or maybe they're just not as stupid and greedy as they were when they themselves were younger.

You're not going to buy one you can't pay for. Ask the local realtors about the exotic variable-rate mortgages that suckered so many younger homebuyers into borrowing more than they could ever hope to repay, and they just shake their heads; not in Sun City. Bob Bleasdell, for example. He's a year-old retired obstetrician who lives in Sun City Grand. You gotta get your debt down, get your bills paid, pay for your car. And then when hard times come, you don't participate. Bleasdell likes it here, enjoys sitting outside in sandals and shorts under a soft blue blanket of sky by a blooming palo verde tree, listening to the quail and the doves, calling out to neighbors as they pass.

He plays golf three days a week, with three different foursomes, rotating among four different courses, none of which takes more than five minutes to get to in a golf cart he parks in its own little garage. Bleasdell says he has no idea what his house is worth today, and furthermore, he doesn't care. His kids might care someday, he allows, but that's neither here nor there. I take my son on fishing trips up to British Columbia. I've done enough for them. If they get anything out of us, it's just a bonus. Don't count on it. Next day I'm driving around the nicest parts of Sun City with realtor Renee Chipules, trying to get a feel for what's out there.

One reason for that we already know: Sun City doesn't have nearly as many foreclosures, which tempt investors and first-time homebuyers with irresistible discounts and are fueling a sharp rebound in sales in some parts of the country. But there's also the ripple effect. No one has to move to a retirement community; when people can't sell their houses back home, they tend to stay put.

Now they're waiting for their homes to sell before plunking down for another. Chipules and other realtors I spoke to think there's a huge, pent-up demand for retirement homes. Once the market recovers nationally, the argument goes, Sun City and other places like it will get a big bump, especially as the coming wave of baby boomers starts to retire. Chipules shows me three houses - similar sizes about 3, square feet , similar layouts two or three bedrooms, all on one floor , similar amenities marble everywhere, hot tubs, curved-glass showers , all of them situated directly on or within sight of a golf course.

But the asking prices are all over the map: