Here is a cool article on flipping houses. Enjoy.
Flipping’ houses: Don’t believe the hype
This year’s buzz in real estate is ‘flipping’ — buying, renovating and selling houses in a matter of months. It’s not an amateur’s game — but that doesn’t stop them from trying.
The booming real estate market is driven by historically low mortgage rates, solid employment growth and brisk demand — not wild speculation.
Flippers — those who buy a house and quickly sell it at a profit in a hot market — are active, but there are no definitive nationwide statistics compiled on the number of mortgages turned over in a year or less. However, the number of flippers appears to be small.
The Federal National Mortgage Association, known as Freddie Mac (FRE, news, msgs), a congressionally chartered corporation that buys mortgages on the secondary market, pools them and sells them as mortgage-backed securities to investors on the open market, says homeowners held a house for an average of seven years in the first half of 2004, compared with 6.5 years in the first six months of 1999.
“Investor interest in the U.S. housing market does not seem to be driving local house-price patterns,” Freddie Mac says. “While there has been some rise in the investor share of overall U.S. home-purchase lending in recent years (from 7% of purchase-money loans in 1998 to 11% in 2003), the investor share has generally remained near or below 7% in most markets experiencing significant price gains in recent years.”
The National Association of Realtors, a trade organization in Washington, D.C., says about 3% of all home buyers sell their home in a year or less. This statistic spikes the conventional wisdom that rampant speculation has created a real estate bubble.
Even if all those who sell quickly are assumed to be speculators — ignoring the likelihood of common reasons for moving, such as job change, divorce or illness — flippers are an insignificant slice of the market. The underlying reason is simple: Unlike the shares of a hot IPO that can be flipped within hours of the first trade for a quick profit, real estate is a long-term investment.
Read full article (http://moneycentral.msn.com/content/invest/forbes/P126962.asp)