Thursday, February 28, 2008

Phoenix Flippers in Trouble

I'd seen similar blogs for California cities, now I'm glad to see there's one for Phoenix. The site lists homes currently for sale at a loss, ordered from greatest total loss to least. Most of these homes have been flipped multiple times before the current flipper got stuck with it.

Despite what a realtor might tell you, when you see homeowners repeatedly reducing prices like this, it is not a good time to buy. It's a good time to wait and watch prices continue to drop. When you start seeing prices go back up for a while, then it might be a good time to buy--it's much better to buy after things have bottomed out and started to increase again than it is to buy on the way down. That's sometimes referred to as "catching a falling knife."

I wouldn't consider buying anything until 2010 at the earliest. We haven't yet even seen the peak of subprime ARM resets, which should hit in the next few months. Then we still have Alt-A ARM resets to peak after that.

8 comments:

Trott said...

Fascinating. If you happen to be aware of a similar list for San Francisco, please clue me in!

Jim Lippard said...

The first blog by the same guy who does the Phoenix one was his Sacramento Area Flippers in Trouble. Looks like those are currently the only two he's doing.

Dan Noland said...

That site is very amusing.

I am amazed to learn that you may have heretofore unknown powers to divine the "bottom" of a market. I thought Professor Fama said we cannot do that.

Jim Lippard said...

While I think enough of the efficient market hypothesis that most of my investments are based on long-term, diverse strategies and think that technical analysis is equivalent to tea-leaf reading, is real estate an efficient market? It seems to me that there have been some very clear indicators for the direction of real estate prices for several years, and that current trends will be continuing for some time. But you're certainly correct that witnessing a few months of price appreciation doesn't mean we hit bottom--we could be on the verge of another Great Depression, where the stock market had several periods of up-trends on its long downward slide.

So my advice about real estate should really just be--purchase what you can afford.

BTW, I think the strong version of EMH is clearly wrong--inside information can genuinely give you an edge. And pump and dump stock scams work:
http://blogs.zdnet.com/security/?p=119
http://www.securityfocus.com/brief/180
http://www.crummy.com/features/StockSpam/

Jim Lippard said...

s/long term, diverse strategies/long term buy and hold strategy and diversification/

Einzige said...

That blog, at best understates the flippers' losses, since it only shows the difference between the the purchase and sale prices.

None of those people got off that easy, since they all had to pay transaction costs and carrying costs, and I'm sure many of them did repairs or upgrades as well.

Not a flipper said...

I would like to find out the name and address of the person who created this site. I would like to sue this person for character defimation. I find my home listed on this site. If it isn't bad enough we are losing our home, they claim we are a flipper and what is why we are losing our home. They have no idea! We bout a home with an adjustable interest rate that came back to bite us.
Anyone have a name and address?

Jim Lippard said...

The "Flippers in Trouble" sites' FAQ defines a "Flipper in Trouble" as "somebody who bought a house within the last two years and is selling it now for less than what they paid." The individual entries offer no comment on the homeowners who are selling, so I think you'd be hard-pressed to make a legal case.

Considering that you are already in financial difficulties, it would probably be foolish to spend money on an attorney to go after a blog simply because you feel insulted by the blog's name. But then again, it doesn't sound like you knew what you were doing when you bought your house, either.

There are attorneys online who can deal with both Internet defamation cases and foreclosure defense...