Friday, 16 December 2011

Home Flipping Major Factor in Arizona Foreclosure Crisis

Speculative real estate investors may have had much more to do with the current foreclosure crisis in Arizona and around the country than earlier believed. According to a new federal report, investors who used the easy availability of low down payment, subprime credit to purchase multiple houses, are likely to have inflated home prices, thereby possibly contributing to the current foreclosure crisis.

The research by the Federal Reserve Bank Of New York focuses on what has been thus far a neglected factor in the housing crisis. Federal officials have been trying to contain the foreclosure crisis, and have not studied the reasons for the crisis in great depth. Now, the Federal Reserve Bank Of New York has found that in 2006, more than one out of all home mortgages in the country were owned by people who already owned at least one residential property. In states like Arizona, these real estate investors accounted for close to half of all mortgage-backed property purchases.

In fact, between 2000 and 2006, real estate investors like these formed the fastest-growing segment of homeowners in the country. As they purchased more and more and more properties, these investors likely inflated home prices, making it more expensive for owner-occupants to purchase homes. Arizona foreclosure lawyers found that values of these homes began to drop in 2006, leading to large-scale defaults on mortgages. Arizona was affected severely by the mass defaults, as were California, Florida and Nevada. In these states, delinquent mortgages accounted for more than a third of the delinquent mortgages numbers nationwide.

According to the report by the Federal Reserve Bank Of New York, both lenders and regulators need to limit speculative borrowing to avoid a housing crisis of this kind in the future.

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