Overvalued From Over-Exuberant Growth
KATU reports from Oregon. “Real estate agents are seeing buyers offering $100,000 over the asking price for house in hot neighborhoods in Portland. Erin Rothrock, with the Hasson Company, said she recently worked on a house in the Alameda neighborhood that received six bids. ‘Five of the six were a hundred thousand-plus over full price,’ said Rothrock.”
“Agents said most of their buyers are from out of town, from California to the East Coast to Asia. Real estate agent Susan Reinhart is showing a 100-year-old house in Irvington, a place many buyers want to live. The house sold for $320,000 in 2004, city records show. Now, the asking price is $700,000. ‘They do whatever they can to buy in a neighborhood like this,’ said Reinhart. ‘I think the surprise for me is, there is more and more inventory, so you would think the frenzy would slow down, but the inventory is being sucked up as fast as it comes on the market.’”
Bloomberg on New York. “For all the attention Manhattan’s ultra-luxury condominium towers have captured, New York City’s largest residential construction boom is in the farther reaches of the outer boroughs. There are 37,243 residential units planned for outer sections of Brooklyn. An additional 17,352 units are slated for the farther reaches of Queens. In Flushing, demand from Chinese buyers is spurring a housing boom near the Roosevelt Avenue shopping hub. Onex Corp. plans 795 condos across three towers. Half of the not-yet-built apartments went into contract within six hours on a single day in January, said Michael Dana, the president of Onex Real Estate Partners. Ninety-five percent of the buyers are Chinese, he said.”
“For the choicest commercial properties in Manhattan’s most desirable locations, the average capitalization rate — a measure of investment yield that falls as prices rise — dropped to a record 3.2 percent in the first quarter, according to research firm Real Capital Analytics Inc. ‘Where you are in this cycle, you have two options,’ said Robert Freedman, chairman of the tri-state division of Colliers International. ‘You can keep chasing compressed cap rates in Manhattan and, at a certain point, it gets silly. Or you can try to create value elsewhere.’”
The Denver Post in Colorado. “Sellers listed a lot more homes in metro Denver last month, but not enough to prevent the average sales price for a single-family home from reaching a new high, according to REcolorado, the region’s multiple listing service. The average price for a single-family detached home sold in metro Denver went above $400,000 for the first time ever in April, reaching $402,302. That was up 11 percent from last year and 3 percent higher than in March.”
“Last month, 7,566 new listings came on the market, a 21 percent increase over March and 8 percent more than hit the market in April 2014. There were 4,416 homes sold, a 7 percent increase from March. That gap between new listings and sales pushed active listings at the end of April to 6,149, 19 percent more than available in March. ‘Improved inventory expanded choices for consumers in April, bringing more buyers to the market and contributing to positive sales,’ REcolorado CEO Kirby Slunaker said in a statement.”
The Dallas Morning News in Texas. “Home prices in Texas are 11 percent overvalued according to the new study by Fitch Ratings. Fitch says that home prices are overheated by almost 20 percent in both Houston and Austin. In the Dallas-area residential prices are 11 percent overvalued and values are 9 percent too high in Fort Worth. ‘Although Fitch identifies many of these cities as overvalued, this is from over-exuberant growth, rather than a lack of strong fundamentals,’ Fitch said in its latest report. ‘The San Francisco Bay Area cities (in the midst of the Dotcom 2.0 expansion) and the Texas oil-patch cities are representative of this group.’”
“The Dallas area is now leading the country in home price gains – up almost 10 percent year-over-year in March, according to CoreLogic. North Texas home prices are currently growing at about twice their long-term average rate due to a dramatic undersupply of houses on the market and strong economic growth. Home prices in the state are also increasing at a much higher rate than median incomes.”
The Worcester Business Journal in Massachusetts. “Foreclosure petitions in Massachusetts continued to climb in March, posting a 68 percent increase compared with March 2014, according to The Warren Group. It was the 13th straight month of year-over-year increases in petition filings. Petitions mark the first step in the foreclosure process. March also marked the highest number of petitions filed since October 2012. Also, The Warren Group said the first quarter of this year posted a 77.3 percent increase from the first quarter of last year.”
“‘We continue to see rises in every facet of the foreclosure process,’ Timothy M. Warren Jr., CEO of The Warren Group, said in a statement. ‘It is frustrating to see the increases month after month. However, it continues to be the result of a large volume of backlog on the part of lenders who continue to track down delinquent mortgages.’”
WAMU on DC. “In December 2013, Patricia Simon and her husband Timothy Snowhite bought one of two condo units in a Columbia Heights rowhouse developer Insun Hofgard had originally purchased for $525,000 in May 2012. The couple paid $764,980 for the 1,280-square-foot, three-bedroom, three-bathroom unit that had been fully renovated. (The second unit was sold in February 2014 for $670,000.)
“But the quality of the work didn’t extend past the aesthetics. Though neither Simon nor Snowhite wanted to comment for this story, their lawyer, Mark Moskowitz, says that the couple suffered at the hands of Hofgard. ‘My clients sought to buy a home where they could have a place to live in the city, have all the amenities and conveniences of living in what was advertised as new construction. And unfortunately, they bought a nightmare,’ he says.”
“Ethan Landis, a builder with 25 years of experience in the region, was brought in to review the work and assess what it would take to correct it. He identified dozens of violations that he estimated would cost more than $200,000 to correct. Beyond that, Hofgard had not obtained the certificate of occupancy required before such projects can be completed and sold.”
‘Its more evidence of a housing rebound in the Pikes Peak Region, property taxes are going up. And if you’re like Geoff Mulligan, then the assessment that came in the mail this weekend probably raised your eyebrows too.’
“When you’re expecting a one percent increase or something flat, then seven percent is a little bit of a shock,” Mulligan said.’
‘In all, 91 percent of residential property owners in El Paso County saw their values increase this year, with a median increase of eight percent. Some neighborhoods grew by double digits.’
‘But to Mulligan, the numbers don’t add up. “We go on Zillow, we look at the value of our home and it’s flat or down and then I get a notice saying oh, by the way, your home property value has gone up 7.96 percent.”
“Its more evidence of a housing rebound in the Pikes Peak Region, property taxes are going up.”
Which means that if you are a government official that has a budget to worry about then this housing rebound is a WONDERFUL THING and this wonderful thing should be ENCOURAGED and you should do everything that you can - EVERYTHING that you can - to keep this housing rebound going strong.
Why, you might even have to (gasp) lie about it now and then.
I was wondering when they would get around to increasing the assessments. These are just now starting to catch up with the last 3 years. You’d think government would have done it expeditiously, but that ain’t government.
The thing is because of TABOR, say if everyone’s assessment went up 10%, your property tax would remain unchanged (at most it could rise in line with inflation). What you don’t want is for your house to appreciate more than the neighbors, because then your property tax could increase.
I like Colorado Springs, specifically the West Side and Manitou Springs, I might move there in a few years after Denver’s transformation into Los Angeles is complete.
My sister sold a condo in Denver recently. She told me of her experience with the realt-liar. Such vile little people they are.
Dupage County taxes just came out here in the western burbs of the Chi and they are up big time. Cook county’s massive hikes will be next year. Studies say they need to increase by 50% or more for us to have any hope. Will be interesting to see what they decide on.
Check my missive when it shows up - I get your pain - DuPage is bad - Kane Co is even worse!!!
Ok - so let me try again here - and as I have noted here on this site several times….. in the loverly western county of Kane west of Chicago - me wife and I had a home - value of home dropped 25% in the downturn and we year after year expected the confiscatory property taxes to drop - they did not - started to appeal to no avail and so I got to a point where I met with Kane Co. assessor and she basically said - we need to pay our bills - so yes the market value of your house did drop but we will just raise the levy because we need the money.
We sold - that is all.
Good news, RJ. It is my landlord’s house. We sold our place last October (top tick here in the Chi!) and are renting for the foreseeable future. Targeting 2018 as the first year we will actually consider buying.
DFTG - Are you stayin or leaving the state of ILLANNOY!!?
I am leaving - had it up to the eyeballs with taxation, pot holes, the cold, the traffic and on and on.
On a separate note: heading out to the west burbs this evening to hang with a dozen or so guys from the church who have all lost their spouses in recent years - shed a few tears, drink some beers and get on with the business of life. Many I am hearing are now in the midst of selling - some are leaving and frankly I don’t have any desire to be left behind hold the bag as it were.
So….very glad my wife was the one who made the decision and convinced me that even at a large loss better to sell than me being stuck takin care of a big ol’ place by myself and being saddled with the cost. HA is right - Crushing Housing Losses……that was our life back in the day.
Don’t know if you are familiar but we had a very nice place near Silver Glen and Randall - Thornwood area.
“expected the confiscatory property taxes to drop”
Don’t know how things are done there, but here the assessed price upon which property taxes are based is much less than market price. Law was passed such that property taxes can’t go up in Portland by more than 3%. (They can go up by more, I believe, if improvements are made that trigger a new assessment) Because of the way the assessment is set, taxes always go up. Did so even as houses lost “market value” in the 2008-2011 time period.
But guess what they invariably go up by? If you guessed 3% you’d be correct.
You were wise to heed Horace Greeley’s advice…just don’t go TOO far west. My folks retired to Wyoming about a decade ago and they couldn’t be happier.
I’m pretty sure I’m stuck in Chicago for the long term. My work is here and I really don’t see that changing any time soon. Yes, the city and state politics are flat out awful and the financial realities are frightening, but it is my hometown and there is still a lot I love about the place. Life took me on stints in Virginia (nice), North Carolina (very nice), NYC (great if u don’t mind dirt, odor, and being broke), San Francisco (horrible even if you don’t mind dirt, odor, and being broke), Columbus (21st century American mediocrity incarnate), and Las Vegas (hell on earth)…but I landed back in the city ten years ago and I don’t plan on leaving until a retirement to South Carolina.
Enjoy your beers this evening.
I might move there in a few years after Denver’s transformation into Los Angeles is complete.
Wouldn’t Denver’s population have to increase 500% for that to happen? Or do you mean a “Mini LA”?
As I have noted several times on this site - Government don’t give a sh*t about your pocket book - even thought the actual value of my wife’s and my place went down 25% in the crash - talking with the assessor in the west suburbs of Chicago at the time know what her answer was - we need the money - we gotta pay all these bills and even though actual market value went down significantly - we are just gonna raise the levy.
Either way these folks in El Paso County CO are totally screwed.
You can thank your spend thrift political class for your higher taxes - That is all.
Another trend: More than a third, or 34.7%, of flip sales have been done by investors — those who never occupy the property. Those deals are usually made by investment funds, including hedge funds. Some of the hottest markets for investor-bought properties include Virginia Beach, Va. (88.8%), Colorado Springs, Colo. (88.4%) and the Washington, D.C., metro area (86.2%).
Hmmmm…….see any connections here - flip a house - increase the price and voila - higher taxes…….hmmmmmm……
…. while holding a melting ice cube.
Kirkland, WA List Prices Plummet 16%; Prices Erode Statewide
http://www.movoto.com/kirkland-wa/market-trends/
Wrong again, HA.
Just drove a random route over Rose Hill in Kirkland last night on my way home from Costco, and there are signs all over for new houses stating “Priced from the $900s”
It’s 2005 all over again.
“It’s 2005 all over again.”
Except this time the coming crash will have no dead bouncing cat rescue. None. The end.
and they’re not selling at any price. Remember housing demand is a 20-year lows. Your beef is with a data not me. Sorry
Richardson, TX List Prices Dive 6% On Oil Bust
http://www.movoto.com/richardson-tx/market-trends/
New York, NY Sale Prices Sink 4% YoY; Price Declines Spread
http://www.zillow.com/new-york-ny/home-values/
Not if you are planning on living at 423 Park Av. Might want to check ou the pre-sales site on that needle of a tower just off Central Park.
Pimped and cherrypicked junk is just that. Pimped and cherrypicked junk.
‘I think the surprise for me is, there is more and more inventory, so you would think the frenzy would slow down, but the inventory is being sucked up as fast as it comes on the market.’
Sounds as though the financial equivalent of a tornado has struck that market. The aftermath could prove devastating.
“… you would think the frenzy would slow down, but the inventory is being sucked up as fast as it comes on the market.”
And this phenom is due to (choose one):
1. Rising prices.
2. Falling prices.
If you chose falling prices then you are logically wrong, but if you chose rising prices then you illogically correct.
“you illogically correct” = “you are illogically correct”
When Macys has a sale and shoppers climb all over each other in order to get into the store on sale day they do this because the prices have gone down. Note: The values (perceived or otherwise) have not gone down, only the prices have gone down.
But when shoppers shop for homes during a frenzy they go crazy over rising prices, not falling prices. And this is because prices represent values - as prices rise the so rises the values.
One would think that values should stand on their own, and they probably would if buyers knew what the values were, but they don’t. Values don’t stand on their own, values have to be discovered. And this discovery process involves the price.
So if you are logical and use some sort of logic to determine values (such as some sort of fundamentals) then you will lose out in a buying frenzy because the people you are competing with are not using the logic offered by fundamentals to determine the value, instead they are using the price to determine the value.
This ain’t happening in my neighborhood. It’s falling slightly and the inventory that is there, and there is plenty, pretty much sits and sits while other houses are added in.
I see a sale here and there, balanced by several coming on the market also. I’m very curious to see how this plays out in the next 6 months. Are they all gonna give up and rent them out? Will they drop prices to clear out the market? I don’t think most people can afford to pay 2 mortgages very long.
From what I’m seeing regarding actual sales prices, the Zestimates, are pretty much correct.
That would be the difference between consumption and “investment”.
I’m seeing that in DC too. Comps are a little bit above Zestimates, but there aren’t a lot of data points.
‘originally purchased for $525,000 in May 2012. The couple paid $764,980 …The second unit was sold in February 2014 for $670,000.’
This guy slapped some paint on it and shazaam! There’s some data points.
BTW, this WAMU piece (three parts actually) is brimming with whining FB’s.
‘Portland-area home prices have bounced back from their crash a little too quickly, according to a new analysis from Fitch Ratings.’
‘Homes in the Portland market are about 9 percent overvalued compared to levels Fitch would consider sustainable. Statewide, Fitch says homes are about 8 percent overvalued.’
‘Prices had held at sustainable levels in Portland and Oregon for the last three years, but edged into overvalued territory at the end of last year, Fitch found.’
‘Most neighboring states are even more overheated. California homes are selling for 11 percent more than Fitch’s model says they’re worth; in Nevada, 14 percent; and in Idaho, 11 percent.’
OK Fitch, what’s up with this?
‘The house sold for $320,000 in 2004, city records show. Now, the asking price is $700,000′
Then:
‘The overheated markets don’t approach levels seen at the height of the housing bubble. Then, Fitch now says, Oregon and Portland-area homes were 27 percent overvalued.’
“The house sold for $320,000 in 2004, city records show. Now, the asking price is $700,000″
Are the lenders performing any sort of due diligence?
LOLZ
That’s some outlandish housing pimp propaganda right there considering lot, labor, material and profit for new construction is $55/sq ft.
Hahaha. $55 psf, Lot, land and profit. No fees? No overhead? No marketing? No cost of funds? Where you building, Fantasyland?
“Fees”? “Marketing”? “Cost of funds”?
You couldn’t build a doghouse if I gave you 6 months and cut the lumber for you.
“Sucked up ” seems more appropriate to describe what happens to houses in a tornado than in a sane, orderly market.
It’s the buyers that got Hoovered, not the houses.
‘Although Fitch identifies many of these cities as overvalued, this is from over-exuberant growth, rather than a lack of strong fundamentals,’ Fitch said in its latest report. ‘The San Francisco Bay Area cities (in the midst of the Dotcom 2.0 expansion) and the Texas oil-patch cities are representative of this group.’
Both cases are representative examples of Housing Bubble 2.0.
‘An increase in home foreclosures could impact your home’s value. More homes began the foreclosure process last month, than any other month over the past three years.’
‘Foreclosure petitions shot up by 77% in Massachusetts, but it’s not all bad news. A new report shows single family home sales made big gains in Franklin County.’
‘Laura Sandvik of Fitzgerald Real Estate in Greenfield told 22News she’s also seeing home prices become more affordable. Sandvik explained how having a foreclosure property near your home could affect the value of nearby properties. “The time between when an owner is served with a foreclosure and the time it takes to get to the market is often long, so that foreclosure property is often in disrepair by the time it actually gets to the market so that house property value can bring down the property value of the neighboring houses,” said Sandvik.’
‘She said she’d like to see more lenders agree to short sales…which sellers can do if they owe more than what their home is worth, a short sale home typically doesn’t stay abandoned for as long as a foreclosure.’
‘The time between when an owner is served with a foreclosure and the time it takes to get to the market is often long’
It can be done in 45 days if need be. Of course, if you throw up all sorts of cry-baby laws like MA did, you get to watch the house rot. And the price is lower because it’s a distressed sale. The distress is on the seller.
Crushing.Housing.Losses.
‘As we continue our series on Utah’s Uncertain Water Future, we explore the consequences of mining groundwater in Utah’s Cedar Valley.’
‘Here at milepost 80 in Enoch on 1-15 state geologists are inspecting a sinkhole on the right of way. This fissure, as it’s called, runs underneath the highway, and the geologists worry that it could grow deep and wide enough someday to rupture the interstate.’
‘The Iron County city of Enoch called his geological hazards team a few years ago to check out what they thought was an earthquake fault in a new subdivision not too far from I-15.’
‘The development in Enoch that turned Lund’s team into fissure detectives is as lonely as a graveyard now. Its one and only house is boarded up. That makes Jay Eubanks the fissure’s surviving victim. He’d built the house as an investment with his family’s savings just months before Lund told the city building officials about the fissure.’
“The inspector told me about it, and I said, ‘What are you — what are you talking about?’ ‘You haven’t seen the sinkhole?’ ‘No.’ ‘You haven’t seen the fissure where the road’s broken up?’ ‘No.’”
‘Eubanks lives 0utside of Iron County, so it wasn’t until he visited the development that he saw a long crack tearing through the road, curbs and gutters. The subsidence even reversed the sewer line, and the city denied an occupancy permit. By 2012, Eubanks had run out of hope.’
“I exhausted every avenue I could think of getting the house finished,” says Eubanks. “I had already lost out of pocket $108,000. I had no savings, credit card was filled up to the limit. And I had no way to continue making payments on the property.”
‘Meanwhile, that subdivision fissure in Enoch keeps growing. It’s 8 miles long now, and the difference between the crack’s edge and the land surface is nearly 3 feet on one end.’
‘For Eubanks, this policy snag is painfully personal. The bank took the house. The county took the land. And this LDS bishop faces years of bankruptcy payments. His family has given up even the smallest of luxuries. They used to enjoy being Secret Santa, but now they get holiday gifts from someone else. Many unlucky breaks plague Eubanks’ investment story, but he mostly blames the sinking and cracking ground.’
“Because people were taking more water than they were allotted, the fissure has grown, and no one was willing to enforce any laws to stop everyone from taking more water, he says.”
“So the fissure killed everything.”
Gambling on real estate can be a b#tch. Of course, had you sold it for twice what you spent, you’d be going on about that too.
hmmm…. they’re blaming the undesirable but unavoidable outcome of paying a grossly inflated price for a depreciating asset on the crater. The crater is just a symptom.
You paid a grossly inflated price for a depreciating asset. That’s your funeral.
Yikes! We will probably be seeing some similar subsidence in California due to the drought, in many areas the aquifer is depleted and those who can afford it are drilling DEEP. This can also make nearby wells go dry due to the cone of depression a deep well causes. Groundwater is very weakly regulated in Calif. currently, new regulations have been passed recently but do not take effect until the 2020’s.
“Burr Ridge Realtor Faces Felony Theft Charges”
http://www.chicagotribune.com/suburbs/burr-ridge/news/ct-dbr-realtor-charged-tl-0416-20150414-story.html
‘‘Five of the six were a hundred thousand-plus over full price’
‘The house sold for $320,000 in 2004, city records show. Now, the asking price is $700,000. ‘They do whatever they can to buy in a neighborhood like this’
‘Half of the not-yet-built apartments went into contract within six hours on a single day in January…Ninety-five percent of the buyers are Chinese’
‘Mygatt said a quarter of homes in metro Denver are now selling for more than $500,000. Three years ago, only 10 percent of homes sold for more than that amount.’
‘The Dallas area is now leading the country in home price gains – up almost 10 percent year-over-year in March, according to CoreLogic. North Texas home prices are currently growing at about twice their long-term average rate’
And of course Janet Yellen can’t see a bubble anywhere.
They want housing prices high. Who are they?
The Oligarchs, the ruling class, the city fathers, the financial elite, the Chamber of Commerce, pensioners, and all current home owners. Your neighbors and friends, your relatives, maybe even the man in the mirror.
They are the overwhelming majority. So the pump up, bail out, easing is carrying out the will of the majority. The mice voted to bell the cat.
Not all homeowners want high housing prices.
I’m a homeowner and I want prices to crater so my grand children can afford to buy houses.
In due time…
I think you mean that the mice voted to take the bell off the cat. Or to refuse to bell the cat. All that stuff about being chastened by the near-collapse of the financial system was phony. Our entire political system has had, as its explicit or implicit goal, the restoration of the 2006 economy.
We are a foolish people and we will get what we deserve.
‘The house sold for $320,000 in 2004, city records show. Now, the asking price is $700,000. ‘They do whatever they can to buy in a neighborhood like this’
Who is they? I don’t think even flippers are dumb enough to pay that much over asking. I think China’s oligarchy is so scared at this pont, they’ll pay anything to have a place to hide their money.
‘For the choicest commercial properties in Manhattan’s most desirable locations, the average capitalization rate — a measure of investment yield that falls as prices rise — dropped to a record 3.2 percent in the first quarter’
http://www.msn.com/en-us/money/markets/yellen-sparks-bond-tantrum-as-yields-soar-from-sydney-to-tokyo/ar-BBjjYzc
‘Japanese bonds fell the most in almost two years and Australian government securities slid for an eighth day in the latest leg of a global debt-market rout.’
‘With the Federal Reserve poised to raise interest rates and Chair Janet Yellen warning long-term yields are low, the U.S. 10-year yield jumped to a two-month high of 2.26 percent Wednesday. Investors in Germany and Japan are balking at yields that are at least 160 basis points below what they can get in the U.S. New Zealand failed to sell inflation-linked bonds Thursday when investors demanded higher yields than the government would pay.’
“There’s a perception that the bull run in fixed income is coming to a close,” said John Gorman, head of dollar interest- rate trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo. Investors “think that the raising of rates is coming.”
‘Aussie bonds are falling even after the Reserve Bank of Australia cut its benchmark to a record low of 2 percent this week. Central bank debt-purchase programs in Japan and Europe haven’t been enough to stem the rout.’
“Yields are rising “with a vengeance,” said Bill Bovingdon, the Sydney-based chief investment officer at Altius Asset Management Pty, which invests the equivalent of $518.9 million. “It is worldwide.”
That 3% cap rate isn’t looking so great now.
Here’s a title on yahoo:
Jobs growth could push Fed to raise interest rates, risk recession
Dumb questions of the day:
1) Would you rather to keep your money in a safe place earning near zero percent a year, or in an exciting investment where you can easily double your money in under a year?
2) Was Wall Street a major player (i.e. investor) in U.S. single-family homes before the advent of the Housing Bubble?
1) There is no free lunch. You can’t “easily” double your money without taking risk. The question is whether you are comfortable taking risk in today’s market, or not. If the answer is yes, you need to find the best risk-adjusted return you can–I doubt it’s an easy “double”.
2) Wall Street was involved in homebuilding before, but primarily through the finance of homebuilding, land banking for public builders, etc. NOT buying individual homes. My theory this time around was that lots of money got raised for “distress”, but RTC part II never materialized, and so that money needed to find a home. It found the most beaten down asset class…voila investing in SFH was born.
“It found the most beaten down asset class…voila investing in SFH was born.”
You are missing it. The asset class was finally reaching equilibrium with household incomes and rents when a flood of money from the Fed was used to prop it back up at bubble levels.
Let’s compare notes in 2015 to see if you or I were right on this!
“in 2025″
2015 is obviously too soon!
David Weidner’s Writing on the Wall
These are the best places to buy and flip a home
Published: May 7, 2015 5:30 a.m. ET
Flippers can nearly double their money in less than a year in some cities
By David Weidner
Columnist
SAN FRANCISCO (MarketWatch) — When you think of house flippers, you probably think of the mortgage bubble, reality shows, easy credit run amok and economic calamity.
You might also think house flipping has gone the way of “liar loans” and BlackBerry phones.
But even in today’s environment of depressed housing and tight credit, house flipping is still a thing. It is, in fact, a very lucrative thing. Roughly 4% of all single-family home sales in the first quarter were flips, and in many markets the flippers are killing it, earning returns as high as 94% on their investments, according to new data released Thursday by housing research firm RealtyTrac.
It’s also clear that the flip market has changed. It’s now a market-specific industry — you can’t just start flipping in, say, Portland, Ore. — and it’s no longer dominated by moms and pops, those couples and small teams that turned the practice into top-rated cable TV shows. House flipping is the sport of big investors with patience, credit and luck in down-but-recovering markets.
And as the chart shows, many of the markets with the biggest profits were some of the hardest hit when the bubble burst in 2008: Daytona Beach and Tampa, Fla., August, Ga., and Detroit, to name a few.
While the pace of housing flips nationally has slowed — it was 6.7% of all single-family homes during the same period a year ago — some cities remain flip hot spots. Markets where flips represented a big share of housing sales included Las Vegas, Jacksonville, Fla., Los Angeles and San Diego, according to RealtyTrac.
On the flip side, other markets are being squeezed. Seattle and San Francisco, for instance, have high prices and low inventory.
Another trend: More than a third, or 34.7%, of flip sales have been done by investors — those who never occupy the property. Those deals are usually made by investment funds, including hedge funds. Some of the hottest markets for investor-bought properties include Virginia Beach, Va. (88.8%), Colorado Springs, Colo. (88.4%) and the Washington, D.C., metro area (86.2%).
Then there’s the timing. RealtyTrac found that it took about half a year, 174 days, to complete the flip process. But again, there was some wide variation. Flips in markets such as Memphis, Tenn., Reno, Nev., and Detroit averaged between 133 and 148 days. In New York, Baltimore and Chicago, the average flip took closer to two-thirds of a year — 198, 198 and 196, respectively.
So, taken together, you can see house flipping, while still essentially the same practice as a decade ago, isn’t the same game. Markets count. Patience counts. A bankroll counts.
That said, house flipping remains a fundamental part of the housing recovery. There are buyers and sellers. Flippers generally don’t flip to other flippers, so some young couple, family or retiree is getting the credit and the home in the end.
Flips also generally remain on the lower end of the price range. Thirty-four percent were executed at between $100,000 and $200,000.
It’s also true that we’re close to, or have reached, the end of the current cycle. During the past few years, one in 20 homes were bought by Wall Street investors.
RealtyTrac in a Dec. 12 report estimated that Wall Street buyers will glean as much as $512 million on Phoenix real estate it bought in the wake of foreclosure mania and sold in better times. Nationwide, at the start of the year, Wall Street was sitting on $1.2 billion in gains if it sold properties it bought at the bottom.
…
The tell is - when you look at real estate sites - it is obvious what homes are being flipped - generally empty - newer cabs in the kitchen - granite etc. Mostly older homes in well established nabes - new carpet a fresh coat of paint - HD photos of the interior to make it look really flashy and BINGO - sold for 2x purchase price.
“Flips also generally remain on the lower end of the price range. Thirty-four percent were executed at between $100,000 and $200,000.”
Buyers in the $100k to $200k price range can’t lay their hands on $1,250.00 unless they take out a credit card advance. As a wise man here frequently says, “Broke Ašš Losers!”
KATU reports from Oregon. “Real estate agents are seeing buyers offering $100,000 over the asking price for house in hot neighborhoods in Portland. Erin Rothrock, with the Hasson Company, said she recently worked on a house in the Alameda neighborhood that received six bids. ‘Five of the six were a hundred thousand-plus over full price,’ said Rothrock.”
Hark, doest thouest hail from hence 2005?
I’ve met that realtor, lol. And yes, absolutely. I’ve been meaning to post in the BB exactly that it feels like 2005 here. A friend of mine counted 22 cranes around town. In one section of town where I used to live, EVERY empty lot now has condos/apartments going up on them over a stretch of about a half mile. What was once pleasantly navigable is now a congested nightmare.
I didn’t think we had much of an out-of-state-buyer issue (other than California) but this confirms that we do.
I went to look at a fixer a few weeks back and when I played dumb and asked what was going on (few days on market, overbidding) he stated that the perceived returns for a small down payment investment are better than any other vehicle so people are “snapping things up” (my words, not his) again.
This should end well.
Yup. Ditto for the Eastside of Seattle. Every buildable space (some of which had been somebody’s back yard for decades) appears to be under construction right now, and there also appears to be a frantic push to construct and get to market ASAP (can’t say that I blame them).
I have two short-plats within view of my house - a 4-lot in the back, and a 2-lot out front. The closing hasn’t even happened yet on the 2-lot (which has been in the same family for over 100 years) and they have already marked utilities and dug soil test pits at four places on the property.
I have lived here since 1995 and this sure does feel like 2005 all over again (but with far lower inventory, lower interest rates, and many more foreign buyers this time).
I believe it. Boise is much the same way. Was there two weeks ago on biz. Lots of mixed-use going up in SW part of downtown.
Many new builds in the surrounding residential areas. West of Boise (Nampa, Meridian) still going crazy.
Friend’s wife is a (one year old) realtor in the Boise area. She stated that Nampa/Meridian seems to be largely out-of-state buyers. She brokered a recent sale with a pilot for SW Air who paid cash ($180k-ish) for a SFR who gave the same reasons as above –> Appreciation currently higher than stocks, income currently higher than bonds.
hey there’s nothing wrong with adding more inventory. How much excess empty and default in inventory is there in Washington State? 1 million? 2 million?
remember I can ask $50,000 for my 10 year old Chevy pickup truck but where’s the buyer at that price?
so it is with any other depreciating asset like a house.
‘Oil fell 2 percent on Thursday, wiping out gains from the past two sessions, as euphoria from the first U.S. inventory drawdown in months faded and focus returned to oversupplies in crude and gasoline.’
‘Gasoline futures were down 44 cents, their most in 16 days, to trade below $2 a barrel.’
‘Physical markets are showing a weaker underbelly, crude traders said, pointing to tens of millions of West African, Azeri and North Sea barrels struggling to find buyers.’
“While the latest draw and the recent slowdown in weekly builds in crude stocks have been seen as positive for the oil price, crude stocks remain exceedingly high,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.’
http://finance.yahoo.com/news/oil-prices-fall-hitting-2015-005115624.html
It’s having a hard time charging up to the $80 level by December that some (well, one) HBB poster(s) have(s) predicted.
http://www.bloomberg.com/news/articles/2015-05-08/china-s-very-high-mountain-of-debt
http://www.bloomberg.com/news/articles/2015-05-08/china-exports-decline-in-april-compounding-pressure-on-economy
Wake up ADan…and do tell us, how does one say crater in Chinese?