A big portion of REO properties in New York City over the 15-year period from 1993 to 2009 were flipped within a year, according to a study conducted by the Furman Center for Real Estate and Urban Policy, a research center launched by the Robert F. Wagner Graduate School of Public Service and the New York University School of Law.
Over the years from 1995 to 2007, 44 percent of all real-estate owned properties sold were flipped within a year. Flipping stepped up over time, peaking in 1998, when 55 percent of all REO sales were resold within one year. Flipping activities then slowed down, dropping to 37 percent of all REO sales in 2006 and to 32 percent of REO sales in 2007.
Furman researchers also found that flipping were very profitable for flippers. The median sales price represented an increase of 45 percent from the original purchase price. An REO home purchased for $300,000 was typically resold for $435,000.
Analysts contended that flipping during the boom years contributed significantly to the housing crisis. They said that flipping artificially pushed up home prices, drove appraisers to set higher home values, enticed homebuyers to purchase huge houses and take out larger loans.
Despite the fact that the number of New York City REO properties was far lower than inventories in other cities, the annual increases in the city were sharp and significant. In 2005, only 115 properties became REO, but 53 percent were flipped within a year. In 2007, 880 units became REO, but only 39 percent were flipped within a 12-month period.
From the first months of 2007 to the third quarter of 2008, the total number of REO units increased because REO sales were slow while REO units continued to enter listings.
In the first six months of 2009, the pace of REO sales was much faster than the entry of properties into REO listings, resulting in a drop in REO inventory. Of properties put into the foreclosure process in 2007, 14 percent went into auction by September 2009.
If buyers renovate REO units before they resell them, they are doing good not only to buyers but also to communities, but if they do only superficial improvements, they are deceiving buyers and putting them at risk. They are also adding more units to run-down properties in neighborhoods.
Furman analysts also reported that throughout 2008, REO properties were concentrated in Central Brooklyn, Eastern Queens, and the northern part of Staten Island.
Author Resource:-> Original Post: Most REO Properties in New York Were Flipped, Furman Says on EForeclosureMagazine.com.
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