Most specuvestors and flippers who bought housing units in the past year and a half in the bubble markets are in financial trouble. The rents that the vast majority of these flippers are receiving in the bubble markets are significantly less than the sum of their monthly mortgage, taxes, insurance and maintenance costs.
For example, back on August 19, 2005 a flipper from San Diego bought a lovely 2br, 2ba condo located in Arlington County, in Northern Virginia (DC Suburbs). The address is 880 N POLLARD ST # 1025. It was bought for $591,300 on 8/19/2005 by someone from San Diego, CA. It has 1040 sq. feet. In the Craigslist post it states "$485000 - OPEN SUNDAY 1-4: STEAL A Brand New 2 BD/2BA Ballston Condo."
Below information comes from ZipRealty (MLS # AR5530848) : Days on Market: 125
Price Reduced: 03/10/06 -- $520,000 to $515,000
Price Increased: 03/11/06 -- $515,000 to $520,000
Price Reduced: 04/21/06 -- $520,000 to $515,000
Price Reduced: 04/22/06 -- $515,000 to $505,000
Price Reduced: 05/06/06 -- $505,000 to $499,900
Price Reduced: 06/09/06 -- $499,900 to $485,000
Additionally, there are 8 other condo units available for sale in this building that are listed on the MLS. (There may be some not on the MLS).
It was bought for $591,300 and is now being sold for $485,000. If the flipper from San Diego recieves the full asking price they will have lost at least $106,300. Ouch! It was never even rented out as it is "Brand new! Never lived in! " Add in carrying cost losses which are in the tens of thousands of dollars and we have a huge financial loss for this unsuccessful flipper.
'Investors' are a large portion of the housing market especially in the bubble markets. As recent specuvestors and flippers in the bubble markets wake up to their continuing financial losses, many of them will try and sell. Inventory is already exploding, while demand is falling.
Wednesday, June 14, 2006
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