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Nows the time to put safeguards in against new home flipping
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Looking back at flipping in 2005 it is amazing that the housing market collapse wasn’t worse.

Flipping was at epidemic levels throughout the Northern San Joaquin Valley.

It was a game of what once many considered to be low-risk, high return real estate investing. The most common “flipping” was when a person put a deposit down to buy a new home being built with no intention of moving into it.

Instead, they would place the home on the market as soon as it was completed.

Flippers made $30,000 to $60,000 in 2005 in six months in places like Tracy where rigid growth caps squeezed the supply while the demand remained strong.

It was a practice that was frustrating new home builders in a number of ways. The worst scenario were buyers people who would jump ship because they didn’t want to wait for a new home and were willing to pay extra money to get one that was being flipped. New builders typically lock in prices once a contract is signed before construction starts. Home construction can take six to nine months. Locking in mortgage rates for that long of a period of time is virtually impossible even with the payment of points.

It could be frustrating waiting as well as costly when mortgage rates started to rise. Builders were losing potential buyers that were willing  pay $20,000 more for the same exact home they were under contract to buy because they didn’t want to wait 10 months.

Some frustrated builders back in 2005 started writing penalties into contracts for buyers who were into flipping.

If you think the only person that was possibly hurt was the builder, guess again. Flipping fed off panic. Housing prices were inflated enough back in 2005 without flipping.

A flipper seven years ago would tell you they were simply playing the market.

True. But they were the first ones hurt and whined the loudest when price adjustments started to occur.

Flippers also sometimes overstepped the rules of the game when they approached Realtors to list their home when they didn’t even have full legal ownership of an occupied structure.

We know now what sounded like a sure deal for a big return wasn’t without risks.

Flippers got burned big time when things started to go south.

But the biggest victims were those who weren’t flippers even if they were just renting.

Flipping helped superheat the market. It sent prices and rents soaring.

Flipping is still going on today as investors buy foreclosed homes, fix them up and sell them.

New home flipping is history - for now.

To avoid a repeat of the housing debacle that started in 2006, government needs to impose safeguards on new home lending to minimize flipping and the practice’s known track record of being able to overheat an already strong housing market.

And if you think there is no rush, guess again., Almost seven years after the foreclosure crisis started, California is just finally getting around to addressing some of the basic ills that have made the housing market free fall worse than it should have been.