When The Real Estate Market Crashed

by Jason LaFlesch

Dear Ladies and Gents,

As real estate is recovering in many U. S. markets and people are contemplating jumping back into home ownership, I realized many are basing their considerations to buy or keep renting on a skewed timeline of the real estate market crash.

Having spent the last 20 years investing in real estate, and as a licensed real estate agent, let me give you an “insider’s” look into how it all when down – literally!

Most people think the real estate market crashed at the same time as the banks and Wall Street blew up. Not so. Real estate actually started declining in 2007.

By 2008 home owners in much of the country were seeing their home values decline, but areas like Phoenix, AZ & Las Vegas, NV were already seeing huge drops.

Believe it or not, housing value declines actually slowed in the most volatile markets by late 2008 and on into 2009 just as the banks and Wall Street were asking for bailouts.

In the greater Phoenix area, homes had slid back to prices seen in the mid to late 1990s. Hard to believe I know, but let me give you a quick example:

In the Phoenix suburb of Queen Creek, Arizona a typical home sale in early 2004 would be around $132,000. By the end of 2006 that same home could sell for $305,000.

Fast forward to early 2009 and that same home could be bought for $68,000. True story!

Locations where large investors bought and sold in mass quantities were affected the most. No question about it!

That’s when the flipping boom in Arizona really took off.

The stock market crash had really hit home by the 4th quarter of 2009. People losing their jobs was in the millions, and these homeowners were running out of money to hang on.

Homes were being relinquished by stressed owners who couldn’t afford to maintain their home properly much less their mortgage; others were foreclosed upon. It was sad to see it all happen.

At the height of the market here in Phoenix (2006), there were very few of us flipping houses. By late 2009, more and more people looked to “flipping” as a potential for income.

Early 2010 was an interesting time for those of us in “trenches”.

Contrary to what people think, most housing locations in Arizona hit “bottom” in the first quarter of 2010.

Flipping Arizona homes in 2010 and into the mid part of 2011 was fantastic! There were huge profit margins to be made for those of us who knew the market well and had the formula for flipping down pat.

Eighty (80%) to one hundred and fifty (150%) percent AROI was not uncommon at all. Crazy right? No doubt, auctions were incredibly exciting.

Imagine seeing a home that I knew would have sold for hundreds of thousands of dollars a few years ago and I just landed it for $55,000? That’s the kind of insanity that took place at every auction!

In most cases, we were buying for both clients and ourselves. Snagging five to eight homes per week was not uncommon.

Within days of the title transfer, the home was fully remodel, on the market and usually sold within days of being listed. Talk about a rush! As with all boom cycles, making the most profit is all about getting there first, and we did.

Late 2011 into 2012 was a pivotal point in the Arizona home flipping game.

Eleventh hour investors started to roll into town and first time investors came out of the woodwork to try their hand at flipping houses.

Institutional money like hedge funds and foreign investors began buying up homes to rent in mass quantities driving the prices up.

I would say 2012 through mid 2013 homes prices in the Phoenix area increased by up to 50% in most locations, with some hard hit locations appreciating easily over 100% from 2008 prices!

As exciting as it can be, flipping homes is a very risky business. It’s not for the timid or the part timer thinking you can do what a seasoned pro does right out of the gate.

We tend to make it look easy from the outside, but when you actually see what it takes to flip a home quickly and efficiently for the biggest return, you may reconsider.

Time is money! Novice flippers sometimes take 6 months to a year to remodel a home.

Real estate markets can change in a matter of months for a variety of reasons and you could find yourself in a world of hurt if there’s a significant drop in the market. I’ve seen it time and time again.

Now more than ever in 2014, buying the flip home with a proven strategy in place is what separates the winners from the losers. (Money speaking that is!)

2014 is still a great time to flip homes, but in today’s market you have to be patient and persistent when buying.

Money isn’t made when you sell the home per se, it’s made on the buy. If you overpay when you buy, you’ll be chasing your potential profits through the remodel and the sale of the home.

Unless you get lucky, the result of over paying for a home will be disastrous.

Be careful!

For more information or to partner up with a company that flips homes everyday and has a transparent track record of successful flips, give us a call at Arizona Investment Link!


Jason LaFlesch