Did flipping houses contributed to the housing bubble?

[skyline00095]

I mean buying a house for the sole purpose selling it at a profit later?

[jkyongi]

Most people who do that lose money.

[special_chemical_x]

Yes - speculation drove prices up and contributed to loans being made that were in excess of the actual price of the home (after correction to more realistic price for the property)

[Mikaela]

Yes.   Since flipping houses looked very profitable, more people were buying houses to try and make a profit.  I also think the cable station House and Garden TV (HGTV) made everyone think they were entitled to their dream house and that also contributed to the housing bubble.

[mike1942f]

Of course.  Also people who were committing fraud by getting houses overvalued for loans and selling at the inflated values. 
  But the primary driver was the absurdly low rate mortgage loans that ballooned later that allowed people to buy homes (and drive up prices with demand) that they could not afford at the later payment rates.
  The financial mess comes from complications after that.

[TaxGurl]

Absolutely.  A lot of people bought houses with teaser rate mortgages with the intention of selling the house at a profit before the mortgage reset to a higher monthly payment which they could never afford.  When the housing values fell, the house didn't sell at a profit, and the investor couldn't afford the payment, many of them simply let the house fall into foreclosure and walked away.  Since many of them never put any money down and borrowed the entire mortgage amount and never lived in the house, the worst thing that happened to them was ruined credit.

This is why the numbers on reported foreclosures are somewhat misleading.  Many of the properties in foreclosure are investment properties that the owner never lived in but intended to flip for a profit.

The worst thing you can do is purchase something under terms you KNOW you can't afford with the intention of refinancing it later.  Tons of people did this and then found out they couldn't refinance and were stuck with a mortgage they should never have accepted in the first place.  Never count on future money.  It's like making commitments based on the salary you hope to make in the future instead of your current paycheck.  Getting a refinancing loan in the future was never guaranteed but a lot of people were depending on it because there was no way they could afford the terms they signed up for.

[Thor]

Other than those people that rehab places it only works in a bubble with fast rising prices.

It is as much of a symptom as it is one of the causes that fuels a bubble.

I read in Las Vegas where prices went up 15% one year and then 25% the next, when prices started to fall and people weren't paying their mortgages that 40% of all defaults the people never made a single first payment.

They figured that was the percentage of new sales of people buying to flip or as a second home for profit.

I read about one woman in Miami that started by flipping 1 house but when things crashed she had 12 homes in default she couldn't sell.