Boom, Bust, Flip - NYTimes.com Tim and Jenni Earll didn't have a lot of money saved up, but they'd seen enough of their friends buy homes to feel like fools for burning their cash on rent. So they took out a 30-year mortgage and bought a fixer-upper on a quiet street in Seattle's Roxhill neighborhood for $309,900. That was in the spring of 2007. Deep thoughts this week: Foreclosed properties are paying off. But not for the middle class. Turns out the housing bust was a boon for the rich. Tim and a cousin spent the next couple of years trying to build some "sweat equity" by redoing the electrical wiring, plumbing and landscaping, but when Jenni lost her administrative position, they had to delay the improvements. Soon after, Tim's work at a glass company began petering out, too. Desperate to hold on to their house, they sought a loan modification, but by the end of 2010, the bank refused to refinance. The following summer, it foreclosed and auctioned off their home to AKA Investors L.L.C., which paid $155,000 in cash for the house. There's a popular perception that so-called McMansions and Garage-Mahals brought down the housing market. Yet more than half of all homes that went into foreclosure between 2007 and 2012 were actually in the lowest price tier when they were purchased, and most were located in middle- and lower-income areas. As foreclosures mounted and home prices plummeted, observers have noted, it was disparately the wealthier investors who bought them up at bargain prices. Credit was hard to come by, after all, which benefited cash buyers. Blackstone, the private-equity giant, bought almost 30,000 homes around the country and now has a nationwide single-family-home rental platform. Others were smaller outfits, like AKA, which bought around 25 homes in the Seattle area. Now, five years after the start of the financial crisis, the housing market has come back, and many of these investors are cashing in. According to tabulations by Redfin, an online real estate listings site, banks have already sold about 1.5 million of the nearly 2 million homes that were foreclosed on during the past half-decade. Resales are becoming more common and can be hugely profitable. A house in Redwood City, Calif., for instance, was sold in a foreclosure auction in 2011 for less than half what the evicted owner paid in 2006. Ten months later, it was flipped for close to its previous price. Another house in Los Angeles went into foreclosure in 2012 and was flipped seven months later for a markup of $254,000, or 66 percent. Of the 87,062 foreclosures in the last five years that were bought by corporate investors and have been flipped, about a quarter were sold for at least $100,000 more than what the investor originally paid, according to Redfin. Although it's impossible to know how much investors spent on upgrades or renovations. That includes the Earlls" house. Last year, AKA flipped it for $290,000, an 87 percent markup. The woman who bought it is a recently retired pharmacy technician named Candace Lee, who searched for a new home for two years before purchasing. And like many buyers these days, she ended up paying cash. Incidentally, she also gave the Earlls a tour of the place a few months ago, when they drove by wistfully and saw her in the front yard. Lee's purchase price was about what the Earlls paid for the house in the first place. If they had been able to refinance they'd likely be about whole by now. Instead, their credit is scarred for at least seven years. The boom-bust-flip phenomenon is just one of the most obvious ways that research suggests the financial crisis has benefited the upper class while brutalizing the middle class. Rents have risen at twice the pace of the overall cost-of-living index, partly because middle-class families can't get the credit they need to buy. That means "landlords can raise rents with impunity," says Glenn Kelman, chief executive of Redfin. And according to a report by David Autor, the M.I.T. economist, job losses during and after the recession were concentrated in midskilled and midwage jobs, like white-collar sales, office and administrative jobs; and blue-collar production, craft, repair and operative jobs. Employment for higher-skilled workers, on the other hand, has grown substantially. As the Earlls can attest, the consequences of job loss go far beyond the spell of joblessness. Research shows that layoffs can worsen earnings, health and even mortality rates for up to 20 years after the initial displacement. Not to mention homeownership. Catherine Rampell is an economics reporter at The Times. Adam Davidson is off this week.