Flipping Broadly Drove Up Prices
A report from the Mississippi Business Journal. “The Mississippi Coast, especially the western portion, is seeing a boom in the second-home market. Some Realtors say the activity is a spillover from the red-hot housing market New Orleans is now enjoying. ‘Things are definitely coming back,’ said John Schaff, a Realtor/broker with Latter and Blum in New Orleans and Bay St. Louis. He said there is ‘a lot of new money in New Orleans and young entrepreneurs are moving in’ to the city in spite of high prices.”
“Realtor Amy Wood said the housing supply on the Coast has a range of prices, from the $100,000 fishing camp to million-dollar property on Scenic Drive in Pass Christian. ‘A lot of people think we are an undiscovered area,’ she said. ‘Prices are so much more affordable.’”
The Memphis Daily News in Tennessee. “Shelby County posted a five-year high in home sales and average sales prices in 2013, according to real estate information company Chandler Reports. The average home sales prices in Shelby County jumped 11 percent in 2013 to $138,072, up from $123,870 in 2012, and total sales volume for the year was $2.19 billion, up 19 percent from $1.85 billion in 2012.”
“Doug Collins of Prudential Collins-Maury Inc., said he believes the market has finally worked its way through a massive glut of foreclosed homes. As foreclosures continued to mount, the federal government and lenders stepped in and created programs to help people remain in their homes. Those efforts, combined with the sheer number of foreclosure sales that occurred over the last several years, finally started to have an impact on foreclosure inventory.”
“‘We had the financial collapse of 2008 and as a result of that we had an abnormally high number of foreclosures,’ Collins said. ‘I think we finally just stemmed the tide of foreclosures.’”
The Atlanta Journal Constitution in Georgia. “Metro Atlanta foreclosure notices are at their lowest level in a decade. There were 2,454 foreclosure notices filed in January, according to data from Equity Depot in Kennesaw. The last time the figures were this low was June 2003, when 2,393 foreclosure notices were filed. Barry Bramlett, whose Equity Depot compiles the numbers, said he thinks lenders are taking steps to avoid the stigma of foreclosures, but that some problems still persist.”
“‘It’s easier to say that things are improving,’ Bramlett said. But, he said, there’s a good chance that possible foreclosures are ‘being handled in a different way’ that makes the improvement seem better than it truly is.”
“John Hunt, a senior analyst with the real estate analysis firm Smart Numbers, said he doesn’t expect another shoe to drop. ‘We’re better,’ he said. ‘We’re constricting the pipeline for future foreclosures.’”
The International Business Times. ” A remarkable U.S. housing recovery in 2013, where home prices rose about 12 percent, may have been driven mostly by business-oriented investors who bought cheap foreclosed homes and quickly flipped them for profit, according to real estate experts. For firms that lend to small-time real estate investors, often wealthy individuals or small companies, business has boomed.”
“Regional lender Lima One Capital, active in Georgia and the Carolinas, doubled its loans from 2012 to 2013, with a 180 percent uptick in loan values. It plans to expand to eight new states in 2014, as it predicts real estate business investment will continue to flourish. Lima One’s loans averaged $166,000 in December 2013, including a $1.2 million loan in Atlanta’s upscale Buckhead neighborhood.”
“‘We anticipate the flipping market will increase,’ Lima One Capital CEO John Warren told IBTimes. He agreed that flipping broadly drove up home prices.”
WSB-TV in Georgia. “The Case-Shiller Home Price Index shows the rebound in metro Atlanta is outpacing the average big city by 50 percent. It shows Atlanta prices up 19 percent compared to the report from the same period in 2012. A $250,000 home then would go for $297,500 according to the latest index. To take advantage of the pent up demand, research firm Metrostudy of Decatur reported area housing starts are up 67 percent from 2012.”
“New home buyer Preston Wang is the first buyer in the Mabry Manor sub-division. He says if he didn’t pay the full asking price, someone else would have. ‘We didn’t ask to get a single penny discount,’ Wang said.”
The Island Packet in South Carolina. “A state lawmaker has announced plans to file a bill in response to escalating flood insurance rates for thousands of South Carolinians. State Rep. Leon Stavrinakis’ proposed legislation would change state foreclosure law to eliminate failing to pay for federal flood insurance as grounds for default, the Charleston Democrat said. ‘In our view, these are people already in their homes who used conditions as they existed to decide whether to buy their homes,’ he said. ‘Now, in effect, the federal government is going in and rewriting the terms of their mortgage.’”
“Stavrinakis, other state legislators, real estate agents and property owners say the measure squeezes some homeowners and makes other properties nearly impossible to sell, causing havoc in the housing market. Some who recently purchased property are seeing their rates increase tenfold when their policies are up for renewal, while rates for second homes or rental units are climbing nearly 20 percent a year, with more increases expected.”
“Lowcountry real estate agents say deals have fallen through after prospective buyers realized the cost of insurance, which can run more than $10,000 a year. ‘It makes certain properties, and by extension, certain areas unsellable,’ said Scott Bingham, a real estate agent with Ballenger Realty in Beaufort. He cited middle-class neighborhoods such as Mossy Oaks and Pleasant Point and high-end beachfront property as places that have become tough sells.”
“Lenders will see more properties go into foreclosure as rates climb, said Nick Kremydas, CEO of the SC Realtors trade group. ‘We’re going to have a very large inventory of properties that banks will inherit and be unable to dispose of,’ he said.”
This:
“John Hunt, a senior analyst with the real estate analysis firm Smart Numbers, said he doesn’t expect another shoe to drop. ‘We’re better,’ he said. ‘We’re constricting the pipeline for future foreclosures.’”
and this;
“Lenders will see more properties go into foreclosure as rates climb, said Nick Kremydas, CEO of the SC Realtors trade group. ‘We’re going to have a very large inventory of properties that banks will inherit and be unable to dispose of,’ he said.”
With foreclosure moratoriums in all 50 states, is it that difficult to see the manufactured housing rally was just that? A manufactured rally?
Now inventory is skyrocketing once again, prices are cratering once again, underwater debtors (we have a few here) rolls are increasing once again, etc.
Everyone….. welcome the resumption of the housing collapse.
without rising home and stock prices the recovery is over. Janet yellen has been wheeled in to resume the party. Got equity?
‘Janet yellen has been wheeled in’
‘PHOENIX — There’s some bad news if you’re trying to sell your home. According to a new report from ASU, the Valley housing market is stuck in neutral. “The market has gone pretty quiet compared with the previous two years,” said Mike Orr, director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business.’
‘from November 2012 to this past November…sales of single-family homes dropped 27 percent. The number of completed foreclosures also fell 50 percent, with many homes reverting back to the bank instead of being sold at auction.’
‘The number of residential properties being purchased by investors was at 20.2 percent, down from the peak of 39.7 percent in July of 2012.’
http://ktar.com/22/1691470/Report-Ariz-housing-market-stuck-in-neutral
The comments:
“Land and housing prices rose too fast in reality. Just like
pre bubble, people want to get top dollar in a bad and stagnant economy. I
personally think this was a false market increase. Look at these three things.
Cost of housing increase, avg salary increase, the real unemployment numbers
and populations shifts. Just last week, it was showing that we are not a
growing state. Actually, more people left then moved into Arizona. Investors
are what is driving this, which is not good for a healthy economy.”
“The real price increase was caused by just a couple of hedge funds like FREO Arizona LLC, Arizona Residential Income LLC or IH1 2 or 3 the Blackstone Group they caused a shortage as they were buying up all the inventory. When 1 buyer closed 200 to 500 units a month in homes sooner or later the market is going to feel it. We are suffering from a Hedge Fund Hangover. The real issue is we saw a 1 percent increase in interest rate and that put every buyer that was borrowing in a different price bracket and many stopped looking. I really think that pricing is very close to market, and resale is still far below building cost. The ones that need to watch what they are doing is the flippers, margins are very tight, this is a buyers market again, but very little room to flip, and very small ROI for investors! Sellers need to really consider every offer they get as it might be the best one!!!”
“There’s some bad news if you’re trying to sell your home.”
And it gets worse if you bought it in the last 14 years.
And to quote one of our more prolific contributors here, “Get what you can get for your house today because it’s going to be less tomorrow for many years to come.”
It is quiet here too. No new homes come to the market, the old ones stay longer, but the prices keep steady. I don’t see any shard reductions. It just takes longer to sell a house around here, but the prices are still too high because the inventory is still too low. I don’t see sharp price reduction until inventory flood the market. New houses still sell like cakes in desired areas
With 6500 defaulted houses, not including excess, empty and deliquents in King County, I don’t think there is an “inventory” problem. And this is the amount they freely acknowledge.
http://www.realtytrac.com/mapsearch/washington-foreclosures.html
And remember…. tens of millions of excess empty houses in the US.
And dont forget, prices have fallen 19% in Seattle since last April.
http://www.movoto.com/statistics/wa/seattle.htm
The only problem is that those houses are not available for sale. I personally know at least two people who lived in their houses for mo than two years for free before banks actually foreclosed on them. I also see some houses around here, not many, very few, but still most likely not occupied (overgrown loans, no lights, garbage thrown around) not for sale. The banks can sit on them as long as the FED keeps buying MBSs. And I don’t see it changing soon. The reason is because Ms Yellan has now idea where brake pedal is… I went to a foreclosure auction several months ago. What amazed me is that for the very few houses (there were around 50 houses for sale) they had 200-300 bidders. The actual sale price for those foreclosures came close to the actual resale price. So there is no actual foreclosure “bargains” left
And dont forget, prices have fallen 19% in Seattle since last April.
Nope, this is the listing price. It doesn’t mean the rices of the houses listed for sale went down. We just got more garbage listed for sale that could affect the median list price. I have been in Seattle housing market for more than two years. And I don’t see prices on the listed homes go down dramatically. There are some reduction when people go crazy with unrealistic listing price. But the prices still stay above any meaningful level. The bubble keeps growing in Seattle, not as fast as it did in 2013, but it doesn’t deflate either
Sure it does. Seattle is experiencing tremendous price compression and a large and massive growing housing inventory.
You might suggest to your friends who are loan owners to exit housing quickly. At least in Seattle, Denver or anywhere in California.
“And dont forget, prices have fallen 19% in Seattle since last April.”
You’re doing yourself a disservice by attempting to conflate asking price with median price. I’m all about your message, but you’re resorting to Realtor spinjive here, and it’s not doing you any favors. Don’t jump the shark.
How can that be?
If the median asking is falling, the subsequent sale is also less than.
I was looking to buy for about a year, but now I am giving up. I am tired of being overbid every time. I don’t see any fallen prices and increased inventory you are talking about. The inventory is still scarce, at lease in my area (King County) and the prices remain high. My search criteria are still same for more than a year 2000+ sq. ft, not older that 30 years and 3 beds 2 baths below $400K. I was able to find around a couple of dozens of houses a year ago, not it is 2-3. I am talking about the same area, I don’t look in different areas. See no changes since summer 2012, except prices keep rising and inventory keeps shrinking…
Sure it does. Seattle is experiencing tremendous price compression and a large and massive growing housing inventory.
No, It doesn’t! Most of the houses for sale have the same price as they were 2-3 months ago. The ones that have seen recent reductions are very few and were tremendously overpriced in the first place even compared to the current bubble level.
Sure it does… The prices continue to be slashed and inventory grows. That’s what happens when prices are massively inflated.
Sit tight, keep your powder dry.
tough to blame on the season since that’s when snow birds arrive
” who bought cheap foreclosed homes and quickly flipped them for profit”
Any actual proof of this or just speculation as usual? I know there were cheap foreclosed homes bought, but that doesn’t mean the price increases came from flipping for a profit. In some few cases maybe. From what I see they were mostly held on to as rentals with long term hopes of massive appreciation.
The price increases happened when more tried to get in to the game late at higher and higher cost bases. More flippers coming in, not end users for the most part.
‘Any actual proof of this’
Well, I’ve been posting articles about flipping for at least a year and a half now, along with bidding wars, writing letters to sellers, 80 people going to an open house in one day, investors buying without seeing the house.
Here ya’ go:
http://thehousingbubbleblog.com/index.php?s=flipping
‘From what I see they were mostly held on to as rentals’
On your street? In your neighborhood?
I’ve seen both strategies.
Some groups have been buying only to flip, some houses generate small margins (5-10%), others bigger (15%+). They started much earlier than the “buy to rent” strategy and are still going (I got a pitch book the other day from a flipper that wants to raise another small pool of money).
Others have been buying to rent.
Perversely, in the early stages of the flip strategy, I think the activity drove prices DOWN. Flippers who bought at auction undercut recent traditional market comps when they sold because they needed to churn the money fast. This kept downward pressure on recent market comps.
However, eventually, both strategies drove prices higher. As more entrants came into the market, the margins shrank quite a bit, and while flippers still liked a quick sale, they had to hold more firm on their pricing given the smaller margins.
What I have seen is that once prices got to a certain point (margins shrank sufficiently), many of these investors slowed down/stopped home purchases (for either strategy).
We haven’t invested in any “flip” strategies. We have invested in the “buy to rent” strategy. We are no longer buying.
“The Case-Shiller Home Price Index shows the rebound in metro Atlanta is outpacing the average big city by 50 percent. It shows Atlanta prices up 19 percent compared to the report from the same period in 2012. A $250,000 home then would go for $297,500 according to the latest index. To take advantage of the pent up demand, research firm Metrostudy of Decatur reported area housing starts are up 67 percent from 2012.”
Yo’ Eddie — you go, girl!
Good luck getting a table at Applebee’s in less than 3 hours.
Let me guess… EddieTard bought a house last spring right when prices resumed falling.
http://www.movoto.com/statistics/ga/atlanta.htm
Didn’t EddieTard move to Seattle and buy his private estate replete with personal ski mountain, spa, and Olympic size pool?
“Undiscovered”? The Mississippi coast was destroyed by Hurricane Katrina. One in every six residents of the state sought assistance from FEMA. But the coast could be destroyed and rebuilt every decade and realtors would still portray it as a great buying opportunity.
Cue the deer.
But the coast could be destroyed and rebuilt every decade
Katrina WAS about 8.5 years ago.
New mortgage monitor out today:
http://www.lpsvcs.com/LPSCorporateInformation/CommunicationCenter/DataReports/MortgageMonitor/201311MortgageMonitor/MortgageMonitorNovember2013.pdf
See page 5 for a map of where the non-current loans are predominantly located.
So this tells us some states’ foreclosure moratoriums appear to be more effective at hiding the number of defaulted properties.
If you look on page 26, the reason is judicial vs. non-judicial. Non-judicial states are able to complete the foreclosure process much faster.
Occam’s Razor:
Is the explanation some massive conspiracy that also happens to largely coincide with the foreclosure processes in the various states?
Or is the explanation very transparent? State that allow faster foreclosures, actually foreclose faster and have cleared the inventory faster?
Which simply means the moratoriums are more effective in non-judicial states.
The Banks don’t seem to be in a big hurry in SoUtah when it comes to pulling the trigger because of non-payment. I got to see another local example today. Family doesn’t make their mortgage payments for a few years, they then get the NOD and after another year they move down the street to a rental.
A couple of months ago they start moving their stuff back into “their” old house. A neighbor asks what the deal is and he is told “the Bank worked out a new deal for us and we’re moving back in!”
These people are the deadest of the dead-beats (criminal records, multiple lawsuits and then setting up a website funding machine 5 years ago to scam money from people by claiming that the wife had cancer and they needed money for her future funeral arraignments).
The website is still active and the wife is still alive and she now has had 2 more babies since her “prognosis” (that makes 7 total and she is now overweight by about 120 pounds).
The “I’m dying of cancer so lets start a website with PayPal access” idea seems to be quite popular with the local gentry around these parts.
The “I’m dying of cancer so lets start a website with PayPal access” idea…
Steadykat
I’m appalled someone would have the chutzpah to stoop that low as to lie about having Cancer for web panhandling. Awful sub-human beings.
Steadykat
Maybe you should contact the FTC or your states General Attorney’s office and see who would go after these folks. I assume that’s a crime at some level. Do it anonymous.
A guy on Seinfeld did it to get a free toupee’.
Ben, I’m curious as to how you think investment funds have been affecting the Flagstaff housing market? Or has it been out of their radar range?
I haven’t seen any funds buying in Flagstaff. Probably too expensive.
Also may not be enough volume coming through. The big guys want volume in order to justify entering a market.
Just call up Jingle Bail. $400k for a single family rental is right up his alley. He can make the numbers pencil out. He’s got a BIG eraser, and a magical mind.
Actually the properties I purchased were mostly acquired for less than $300,000. They rent for $2250/Mon and have been nearly 100% occupied since I bought. Great metrics. Best investments of my lifetime.
<$300k houses. Rent $2250/mon. Value up 30%. So far, they are the best investment of my lifetime!
Which is meaning here considering your credibility is non-existent.
What are your losses?
“Stavrinakis, other state legislators, real estate agents and property owners say the measure squeezes some homeowners and makes other properties nearly impossible to sell, causing havoc in the housing market. Some who recently purchased property are seeing their rates increase tenfold when their policies are up for renewal, while rates for second homes or rental units are climbing nearly 20 percent a year, with more increases expected.”
Basically, the federal government is cutting back on the extent to which it subsidizes those who build and live in flood plains. This is long overdue, but much damage has already been done. People are stuck in places where expensive development should not have gone.
‘In our view, these are people already in their homes who used conditions as they existed to decide whether to buy their homes,’ he said. ‘Now, in effect, the federal government is going in and rewriting the terms of their mortgage.’
They’re screwed. Even if all existing homeowners were exempted, and non-flood plains taxpayers were forced to subsidize people like this, they still would not be able to sell.
Cratering housing. It’s as though it’s 2008 again.
Bunny hills are for closers.
“Lowcountry real estate agents say deals have fallen through after prospective buyers realized the cost of insurance, which can run more than $10,000 a year. ‘It makes certain properties, and by extension, certain areas unsellable,’
If you want to live in the “low country” it’s time for YOU to pick up the tab.