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Originally Posted by kutulu
First of all, when investors go out and snatch up homes they cause a false increase in the demand for housing because they are buying a property that they have no use for. This causes prices to climb at a faster rate, which in turn, forces actual prospective homeowners to have to pay more than they should. Then when the market correction happens...
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In some cases speculators create hot markets. Example there are many inner city urban areas that were in decay. Speculators came in, did some improvements, and flip the properies at a high profit. If not for those investors taking the risk and creating a demand, regular buyers would have passed on some great homes in urban areas.
I also believe most of the "flipping" is the end result of housing shortages. In markets where supply is equal to demand you don't get "flipping" unless there is value added by the investor. Inadequate supply is usually the result of either poor city planning or existing homeowners wanting slow or no growth.
"Speculators got to eat, same as worms" (an almost quote - Clint Eastwood from Outlaw Josie Whales). Speculators serve a needed role in our economy.
