As soon as I saw the headline in the Wall Street Journal this morning, "Hot Homes Get Cold: In Once-Booming Markets Such as the Florida Coast, Housing Sales Languish," I knew the housing market vultures at the Housing Bubble Blog would explode in a frenzy of exultation.
Sure enough, by the time I made my way to the blog, there were 141 comments on a posting that summarized the highlights of the Journal's story, with special attention given to the woe of Todd Linsley, a 37-year-old investor who bought a three-bedroom house for $318,000 in late 2005, planning to quickly sell it for a markup of at least $100,000, but who has been unable to find any takers. His listing price is now $379,000, and the future, given what seems to be a hefty downturn in the Florida real estate market, looks bleak.
Mr. Linsley is a "flipper" -- someone who buys houses for the sole purpose of selling them ASAP. In the world of housing bubble watchers, no one is more derided or detested than the flipper. Back during the dot-com boom, the day-trader was the target of bile; today it is the housing flipper. (In fact, one poster even wondered how many of today's flippers were once day-traders.)
Another poster was so overcome with glee, he rewrote a little song about Flipper the dolphin.
"They call him Flipper, Flipper, faster than lightning,
no-one you see, is dumber than he,
and we know Flipper, lives in a world full of blunders,
flying there -- under, under the sea!
It's a curious kind of class war envy. Maybe it's a relic of some kind of Protestant ethic: If you don't sweat for your money, you don't deserve it. Maybe there's a worry that the homeowners caught holding the bag will be the sad saps taken in by a fast-moving flipper, forced to pay far more than a house is actually worth, just because they really want to own a home. In any case, it's hard to imagine another spot on the Web right now where you can find three separate posts proudly referencing the word "schadenfreude" to describe their feelings of delight at the plight of Linsley and his fellow flippers.
By one line of reasoning, flippers, who like to use no money down, adjustable-rate mortgages because their plan is to get out before mortgage payments ever start to balloon, are pure speculators who have driven the price of housing up beyond reach for hardworking families who want to move from renting to buying. But you could also make a case that flippers have been fueling the long-running real estate boom, which has had enormous trickle-down effects for the construction industry and other sectors of the economy. If flippers start dropping like flies, that could portend a recession that hurts everyone. Who really wants to cheer that on?
The National Association of Realtors, by the way, is calmly predicting that a devastating collapse is not imminent. Although a press release on April 11 did note that "Existing-home sales are projected to drop 6.0 percent to 6.65 million this year from a record 7.08 million in 2005" and "New-home sales are likely to fall 10.9 percent to 1.14 million from the record 1.28 million last year," it also emphasized that "both sectors would see the third best year following 2005 and 2004."
The third best year in history is not too shabby. There may yet be some room for flippers to frolic. Or maybe the NAR is just refusing to see the looming iceberg. We'll all have to wait for another round of housing market economic indicators for our next clue, and the next spasm of glee, or disappointment, from the bubble watchers.