Alexandria, Virginia (PRWEB) January 06, 2012
The Federal Reserve Bank of New York has recently issued a report that claims that investors played a major part in creating the housing bubble that, ultimately, resulted in the economic crisis of 2008. Specifically, the report cites the activity of speculative investors within the real estate market as causing the rapid decline of home values and increase in foreclosures within Nevada, California, Florida, and Arizona. Matthew Vettese, a former house flipper and real estate professional, sees the connection but views house flipping as a way to improve today's down market.
An article by Cristina Silva, published on boston.com, asserts that the housing bubble was originally caused by subprime, low-down-payment purchases made by real estate investors. As an emerging field that offered a high return on a considerably large investment, flipping houses became popular because such financing options were available. Without having to pay a substantial down payment, Matthew Vettese and other real estate investors were able to spend more money updating and renovating their properties. This investment paid off, as home prices skyrocketed.
Such rapid growth proved unsustainable and the housing bubble popped. This dropped the values of homes and stalled the real estate market, leaving homeowners with inflated mortgages they couldn't pay. According to Silva, "Investors defaulted in large numbers after home values began to drop in 2006. They accounted for more than 25 percent of seriously delinquent mortgage balances nationwide, and more than a third in Arizona, California, Florida, and Nevada from 2007 to 2009. As a result, millions of homeowners saw their home values decline so that they were worth less than the original purchase price."
As the country continues to rebuild its economy and climb out of the recession, real estate professionals, including Matthew Vettese, recommend allowing speculators to help restore the economy that they have, largely, brought down. In fact, the Federal Housing Administration has recently extended the ability of real estate investors to secure mortgages that are intended to be sold within 90 days. Experts say that flipping homes in low-income neighborhoods can improve housing quality and residential environments.
While some real estate professionals may discourage flipping, proponents of this tactic hope that allowing investors to put their money into this down economy can help improve the housing market and the overall economic environment of the United States.
Matthew Vettese is a former real estate professional who participated in the house flipping activities of the early 2000s. An individual who holds real estate and mortgage broker licenses, Matthew Vettese approaches the issue from a unique and well-rounded perspective.