Whatever you need to tell yourself to make it easier to sleep at night... I'm about to move and was considering moving to a nearby larger city (where a lot of my friends moved a few years ago), until I saw the housing prices. The prices have doubled in the past three years. I know that housing prices go up in fits and spurts, but there is no way those houses are really worth what they're listing for. But people buy them anyway--and I can see you saying it now, "But if the houses are being purchased at that price, then they were worth that price, by definition." Which is where I point out that most people expect a house to appreciate in value, but those houses will probably drop in value or at least not increase for the next several years.

Here's what happened in this market: the housing price started to go up a little faster than average (because people started realizing that this was a nice place to live). Then the flippers said, "Hey, prices are going up. I can buy a house now, sit on it for a few months, and then sell it at an even higher price." People that had to move into the area (or people that had to move into a larger house), paid through the nose and hoped for the best. But there are only so many people like that (and everyone else is avoiding buying real estate in that area). In fact, recently I've seen new listings go up for considerably lower prices than before. So it looks like the bubble is starting to burst, and these flippers will get stuck with selling houses at a loss.

To summarize, all flippers do is temporarily raise housing prices to whatever the flippers think is the "true value" before the market corrects itself.