The highlights in the article are mine. Accelerated and a pull forward of demand fueled by low interest rates on the notion of quick profit while competition in tight. All signs of a healthy recovery right?
Article originally posted to FT.com
Article originally posted to FT.com
Flip That House, along with other
US reality television programmes about investors who bought properties
to revamp and sell for a quick buck, went dark when the housing market
crashed. But now bargain hunters looking to make a profit, and the
cameras that follow them, are back.
Low interest rates, a slowly improving jobs market and greater consumer confidence have spurred more Americans to buy houses. Rapidly depleting inventories of homes for sale and surging prices have created a sweet spot for house flippers – those who buy and sell the same home within six months.
“It’s all about pricing,” said Richard Sluzewski, who has been flipping houses in Daytona Beach, Florida, for 22 years. “Everyone is expecting property values to keep on climbing so it’s a great time for flippers. Investors are spending more on renovating homes now compared to last year, knowing that buyers are willing to pay more. With such low supplies, it’s a sellers’ market for sure.”
Prices across the US are rising at their fastest clip since the height of the housing bubble in 2006, up 12.1 per cent in April from a year ago, according to the Standard & Poor’s/Case-Shiller 20-city index. But prices are still at least 25 per cent below peak levels in many markets, which is giving flippers an incentive to keep buying and selling aggressively.
About 7m homeowners lost their properties through foreclosure or by selling for a loss since 2007. But the housing market crash and its fallout left countless speculators holding properties they could not move, so flippers are being more careful with their investments.
“One big difference between the flipping frenzy of 2004-08 and now is that people were able to take advantage of loose lending practices which created a lot of trouble. This just isn’t the case right now,” said Daren Blomquist, vice-president at RealtyTrac.
Aside from putting down large cash deposits they are making calculated bets on where they invest.
“Flippers need to buy low and sell high, so flipping is most profitable where the home price recovery is in its early stages and where a recent rebound in foreclosure activity allows investors to find distressed inventory at a discount,” Mr Blomquist added.
Investors are moving away from traditional flipping hotspots such as Phoenix, Arizona and Atlanta, Georgia, that have fewer bargains available.
“Competition is so fierce. I’ve resorted to mailing letters to homeowners whose houses are not yet on the market. Finding a good deal is incredibly difficult,” he said.
Daytona Beach in Florida, Pittsburgh in Pennsylvania and Charleston in South Carolina are among the most profitable markets.
But flippers are looking to cash in before a tax exemption for troubled homeowners expires. The government in 2007 created a provision allowing those owing more on their homes than they are worth to exclude from taxable income any mortgage debt written off by their lenders through a short sale – when a property is sold at a steep discount. The expiration of this provision at the end of the year, investors believe, will lead fewer people to sell.
Mr Sluzewski added: “It may be more difficult to get a good deal from the start of next year, so flippers are getting in now and are buying as fast as they can.”
Low interest rates, a slowly improving jobs market and greater consumer confidence have spurred more Americans to buy houses. Rapidly depleting inventories of homes for sale and surging prices have created a sweet spot for house flippers – those who buy and sell the same home within six months.
“It’s all about pricing,” said Richard Sluzewski, who has been flipping houses in Daytona Beach, Florida, for 22 years. “Everyone is expecting property values to keep on climbing so it’s a great time for flippers. Investors are spending more on renovating homes now compared to last year, knowing that buyers are willing to pay more. With such low supplies, it’s a sellers’ market for sure.”
Prices across the US are rising at their fastest clip since the height of the housing bubble in 2006, up 12.1 per cent in April from a year ago, according to the Standard & Poor’s/Case-Shiller 20-city index. But prices are still at least 25 per cent below peak levels in many markets, which is giving flippers an incentive to keep buying and selling aggressively.
House flipping deals are on track to hit a record this year, data from RealtyTrac shows. They were up 19 per cent in the first half of 2013 from a year ago and 74 per cent higher than 2011.
Profits are also climbing to the highest in seven years, with
investors making an average $18,391 on each sale, more than triple
returns in the first six months of 2012 and compared with losses of
$13,206 two years ago.About 7m homeowners lost their properties through foreclosure or by selling for a loss since 2007. But the housing market crash and its fallout left countless speculators holding properties they could not move, so flippers are being more careful with their investments.
“One big difference between the flipping frenzy of 2004-08 and now is that people were able to take advantage of loose lending practices which created a lot of trouble. This just isn’t the case right now,” said Daren Blomquist, vice-president at RealtyTrac.
Aside from putting down large cash deposits they are making calculated bets on where they invest.
“Flippers need to buy low and sell high, so flipping is most profitable where the home price recovery is in its early stages and where a recent rebound in foreclosure activity allows investors to find distressed inventory at a discount,” Mr Blomquist added.
Investors are moving away from traditional flipping hotspots such as Phoenix, Arizona and Atlanta, Georgia, that have fewer bargains available.
In many cases this has been to do with the presence of large scale institutional investors
who have scooped up huge swaths of distressed properties in markets
worst hit by the housing bust. Prices in these markets have risen more
than 20 per cent, making them less attractive to those seeking a good
deal.
Scott Mednick, a flipper in Orange County, California, said there were very few properties available where he wanted to buy.“Competition is so fierce. I’ve resorted to mailing letters to homeowners whose houses are not yet on the market. Finding a good deal is incredibly difficult,” he said.
Daytona Beach in Florida, Pittsburgh in Pennsylvania and Charleston in South Carolina are among the most profitable markets.
But flippers are looking to cash in before a tax exemption for troubled homeowners expires. The government in 2007 created a provision allowing those owing more on their homes than they are worth to exclude from taxable income any mortgage debt written off by their lenders through a short sale – when a property is sold at a steep discount. The expiration of this provision at the end of the year, investors believe, will lead fewer people to sell.
Mr Sluzewski added: “It may be more difficult to get a good deal from the start of next year, so flippers are getting in now and are buying as fast as they can.”
No comments:
Post a Comment