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Americans still think they can make money flipping houses

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Re: Americans still think they can make money flipping houses

#11

Post by chiph »

Waterluvian wrote: post #3

Is real estate in the US one of those industries where corner cutters think, “oh that’s an easy career” ? My Instagram timeline has become filled, for some reason, with local (not to me) agents insisting that there is no bubble and now is the time to buy. And they’re all really unprofessional looking and sounding and seem to be worried about one thing: their business.

To a real estate agent, it's always the perfect time to buy. Market is up? "Buy before prices rise!" Market is down? "Buy while prices are low!"

There are training classes you can take to get your agent's license, so entering the field is pretty straightforward. There are usually a lot of part-time agents who make enough off each sale to justify staying in the field. And a very few who have worked their way up to selling high-dollar properties and make quite a lot of money. It's customary for a sale to have 6% realtor fees, split between the selling and buying agents. So the more a house sells for, the more they make. A falling market will drive some agents out of the field.

Re: Americans still think they can make money flipping houses

#12

Post by hardwaresofton »

This isn’t 2008, at this point I think people are underestimating the speculative home buyer. The people who are buying houses now are more likely people looking to build rental income cash cows.

In a world where productivity is somewhat slowing after massive growth, people are taking to rent seeking activity and the disincentives aren’t there to encourage productive behavior.

Why buy and sell when you can buy, charge rent, and pass down to your kids?

Re: Americans still think they can make money flipping houses

#13

Post by nxm »

saiya-jin wrote: post #10
mchusma wrote: post #4

If real estate is to be a good investment, it must become less affordable over time. The idea that real estate in general is a good investment is dangerous to our economy. The solution to housing is reducing subsidies and removing supply side restrictions. However these are not politically popular in a world where people want housing prices to go up.

Yes if everybody should live in their own real estate. There are superbly working economies where this is not true for many decades for various reasons (ie Switzerland) and they do just fine and people are happy, just focus on more important matters in life. There are many arguments against urban sprawl which is direct consequence of such approach.

Not a fan of comparisons of other countries to one of the most wealthy per capita, homogenous one. Switzerland is an exception and not a rule

Re: Americans still think they can make money flipping houses

#14

Post by nxm »

WheelsAtLarge wrote: post #2

It's not just the up keep. House prices are dropping fast. What seemed like a hot market just 6 months ago, it is not a Luke-warm one.

They are not dropping fast. Perhaps a $5-20k cut in some regions, but in others they are still appreciating albeit by a smaller amount than in previous years. Too much money and not enough housing to lower prices

Re: Americans still think they can make money flipping houses

#15

Post by lotsofpulp »

pmorici wrote: post #8

Housing is unique in that it is one of the few, maybe the only, assets where leverage in the form of a loan is relatively easily available to even people without a lot of assets. Where as other forms of leverage like margin loans require the borrower to already have assets for collateral. To buy a house you basically just need a reasonable job and a few thousand for the down payment.

Because taxpayers subsidize it by accepting looser underwriting standards.

Re: Americans still think they can make money flipping houses

#17

Post by tyjen »

House price fluctuation is still local market dependent. People who purchased overpriced, new mass developer homes in saturated newer markets may suffer a contraction. Areas with supporting high demand, low inventory, and inability to develop newer properties will maintain increasing valuation, but not at the same rate. A savvy home flipper can still make money, it's just harder to do so with increased competition in that area.

This isn't a repeat of the 2008 financial crisis, in which financial institutions overloaded on mortgage-backed securities fueled by easy access mortgage loans without thorough loan application vetting. The deluge of foreclosures isn't likely to occur and people are likely to hold onto their houses and maintain firmer home prices during this slowdown.

Re: Americans still think they can make money flipping houses

#18

Post by m0llusk »

It is an amazing contrast with the situation when I was younger. House prices were bounded by wages and were understood to be depreciating assets. That is, without constant investment they lost their value and became unusable and difficult to trade. Even in the best of times it takes time, preparation, and fees to sell real estate. Landlording was a rich person's game because of the risk involved and if you really wanted to make money it was expected that any properties to be rented should be fully paid off because of the slim profits and high risk of damage to the property.

The whole idea of fearing loss of value was completely different: Nowadays houses are bidding chips and people want to make the numbers go up to feel rich. In the past sharp losses of value meant the area was no longer desirable so that people were not moving in and so wages would no longer support prices in that area. Either things were modest and relatively stable or unstable and sinking.

The current attitude toward housing is based on the recent explosion of house prices which is driven by financialization, extremely low interest rates, and demand outpacing supply where there are jobs. Economic, political, and demographic changes are very likely to wipe all of that out in a relatively short period.

Re: Americans still think they can make money flipping houses

#19

Post by Victerius »

hardwaresofton wrote: post #12

This isn’t 2008, at this point I think people are underestimating the speculative home buyer. The people who are buying houses now are more likely people looking to build rental income cash cows. In a world where productivity is somewhat slowing after massive growth, people are taking to rent seeking activity and the disincentives aren’t there to encourage productive behavior. Why buy and sell when you can buy, charg…

Eventually, people just move away. US states with a high cost of living have lost millions of residents to low cost of living states during the last 10 years, to the point when California and New York are about to lose an electoral college seat each. And, yes, California and New York landlords are partially responsible for that for the reasons mentioned above.

The financial industry is moving away from the northeast to the south, primarily Florida, Texas, and the Carolinas.

High rents, taxes, and property prices make people and businesses run away.

Re: Americans still think they can make money flipping houses

#20

Post by civilized »

hardwaresofton wrote: post #12

This isn’t 2008, at this point I think people are underestimating the speculative home buyer. The people who are buying houses now are more likely people looking to build rental income cash cows. In a world where productivity is somewhat slowing after massive growth, people are taking to rent seeking activity and the disincentives aren’t there to encourage productive behavior. Why buy and sell when you can buy, charg…

So, if houses were to become investments on a massive scale, and -- as seems inevitable -- they ended up in the hands of only a few, does that change the politics of housing supply?

Before, your neighborhood's voters were homeowners who benefit from rising property values; after, they're renters who benefit from falling rents.

I've heard that Germany has more of this renting situation but no idea about the politics of housing supply over there.

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