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Real estate slump chills 'flippers'

As demand cools, quick profits are less certain

Get in, get out, get the next deal. That's the code of the ''flipper."

Flipping -- buying and quickly reselling homes -- has helped some investors make a killing over the past few years in markets such as the North Shore.

But with concerns rising about a slowing housing market, has the world flipped on flippers? Some analysts and brokers think so.

Short-term investors can't expect the same quick, lucrative turnarounds anymore, said Beverly realtor Pam Cote. There are many more properties on the market, and buyers are spending more time deciding, she said.

''I don't think people are running out to buy multifamily homes for a fast turnover," said Cote, past president of the North Shore Association of Realtors.

Karl Case, a Wellesley College economics professor and real estate analyst, said he sees a ''growing excess supply" in Eastern Massachusetts that has dampened the expectations of flippers.

Case said demand from both flippers and typical homebuyers could be fizzling. ''Buyers are disappearing, or they're remaining but lowballing on prices," he said.

Real estate investing by buyers who don't plan on living in their properties may be at historically high levels, Federal Reserve chairman Alan Greenspan said in a speech this fall to the American Bankers Association.

The pattern suggests that speculative activity may have had a greater role in generating recent real estate price increases than in the past, Greenspan said, and he warned of signs of ''froth" in some housing markets that could drive prices to unsustainable levels.

And some believe that prediction is coming true on the North Shore.

''You see a lot more homes just sitting there," said Salem State College economist Dorothy Siden. ''The hype about a slowdown seems to be getting to people, especially with big houses. With individual houses, flipping is not going to bring in a lot of money right now."

Flippers aren't bailing out just yet, though some are getting anxious, said Mike Hurney, a short-term investor and leader of the Massachusetts Real Estate Investors Association, which meets in Peabody.

''I'm getting about a call a day from someone saying, 'I can't sell this, can you help?' " he said, referring to members of his association who have purchased properties with the hope of making a quick profit.

Fall and winter is the time for buying, not selling, because prices usually come down, Hurney said. According to his calculations, the ideal property to buy and fix up is in a town like Marblehead, and would be a single-family home with three bedrooms, 1.5 bathrooms, and needing less than $60,000 in renovations. He would expect to sell the property after about three to six months, Hurney said.

In a housing slowdown, flippers simply hold their properties longer than they would like, rather than dumping them quickly as a nervous stockholder might, Case said. Still, if demand from speculators dwindles, it could accelerate a decline in prices, he said.

''If expectations changed and speculators went out of the market, that would exacerbate a downturn," Case said. ''Anytime you take demand out, a downturn happens that much faster."

Sales of single-family houses in Massachusetts declined for the second straight month in October, according to the most recent data available from the Massachusetts Association of Realtors. The figures also suggest that the number of properties sitting on the market recently has begun to balloon, a worrisome sign to some analysts. Mortgage interest rates have also edged higher recently.

But smaller properties can still be moved, said Jarad Williams, co-owner of A&J Properties in Sandown, N.H. Williams, who is also president of the Chelmsford-based New England Real Estate Association, invests in property in the North Shore.

''We try to make money in volume, not really big deals," he said.

Just two years ago, Williams was blowing up rocks part time as an explosives engineer. But he had also been investing in real estate for a few years, and decided to give up dynamite in favor of deal-making.

Williams said he finds fulfillment in helping homeowners solve their financial problems, though he doesn't hide that he's an investor. He said the company has built up enough of a reputation that it relies on referrals and not advertising. His company refers customers with checkered financial histories to a financial services company, Williams said.

''I'm just being honest with people," Williams said. ''I tell people how I come up with the offer, and show them comparable sales of similar houses. I tell them up front that this is how I pay my bills, that this is how you can resolve your situation and I can make a profit."

While others have compared flippers to the day traders whose exodus sent the stock market tumbling at the end of the dot-com craze, Case, the Wellesley economist, sees key differences. The real estate market is more stable, he said, and a strong economy could forestall a steep drop in prices.

''Just because there's excess supply doesn't mean prices fall right away," Case said. ''There's a tug of war, and it depends on what happens to the economy."

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