House flippers played bigger role in housing crisis than thought

December 13th, 2011

House flippers played a bigger role in the housing bubble than originally thought, according to a report from the Federal Reserve Bank of New York. The New York Fed says that "borrowers who use financial leverage in the form of mortgage credit to purchase multiple residential properties" likely caused prices to escalate during the 2004 to 2006 period, then defaulted in large numbers when prices declined early in 2006.

Record foreclosures

The housing crisis has led to a record number of foreclosures in states like Nevada, Arizona, California and Florida. There has been a lot of speculation about who was responsible for the housing bubble, and the New York Fed data suggest that investors played a bigger role than previously recognized. According to the New York Fed:

"At the peak of the boom in 2006, over a third of all U.S. home purchase lending was made to people who already owned at least one house. In the four states with the most pronounced housing cycles, the investor share was nearly half--45 percent. Investor shares roughly doubled between 2000 and 2006. While some of these loans went to borrowers with "just" two homes, the increase in percentage terms is largest among those owning three or more properties. In 2006, Arizona, California, Florida, and Nevada investors owning three or more properties were responsible for nearly 20 percent of originations, almost triple their share in 2000."

Use mortgage calculators

Investing in real estate can be risky if you don't know what you're doing. While there are a lot of housing bargains out there right now, it is a bad idea to get into a real estate investment without understanding all the numbers. Use a free mortgage calculator to run the numbers and make a more informed decision. A lon calculator can give you a break down of the principal and interest payments you'll have to make on a loan. But keep in mind that there are other expenses with investing in real estate that you may not have with the house you actually live in.

Posted By :

Mortgage rates remain above 5 percent as consumer prices rise

February 18th, 2011

There is a relationship between prices you pay in the store and the rate on your new home loan or refinance mortgage. This week two key indexes on prices were...  Read More

Rates at 10 month high, White House proposes changes for Fannie-Freddie

February 12th, 2011

While the world was focused on events in Egypt this week some major news was occurring at home for the mortgage industry. The industry took a look back and speculation...  Read More

Mortgage rates rise for third straight week

February 04th, 2011

In spite of rising tensions in Egypt and elsewhere, it appears foreign affairs had little impact on mortgage rates this week. New home loan and mortgage refinance applicants are continuing...  Read More

Your mortgage rate: Beyond the data

January 28th, 2011

As reported by Freddie Mac on Thursday mortgage rates increased for the second week in a row. As reported by the Mortgage Bankers Association refinance applications are at their lowest...  Read More

0 Responses to "House flippers played bigger role in housing crisis than thought"

No Comments

Leave a Comment