It’s back to the future for the US housing market, with CNBC reporting that flipping rates – i.e. the number of homes bought and sold within six months – are once again booming across the US, increasing by 19% from a year ago and 74% from the first half of 2011, according to a new report to be released on Friday by RealtyTrac.
“Home-flipping business has keyed up quite a bit in the last 6 months,” said Steve Jones, founder of Los Angeles-based Better Shelter. Jones, who has been flipping homes for five years, said the competition is really heating up.
“There’s not a lot of inventory, and every time a listing comes up it’s like piranha in the water,” he said…
The math is looking better and better to investors as prices rise, with one possible hitch: Rising mortgage rates. Investors largely use cash on the front end, but their buyers don’t.
“On the flip side, when they are actually flipping the properties to the end-users, interest rates matter because those end-users will not be able to afford as much as interest rates go up”…
Large-scale institutional investors have been swarming the distressed housing market since the height of the housing crash, buying homes in bulk, rehabilitating them and putting them up for rent. Companies like Blackstone, Colony Capital, Waypoint and hedge fund titan John Paulson have been reaping solid rewards on the trade.
Paulson, speaking at CNBC’s Delivering Alpha conference, said he is still high on housing.
“It’s not too late to get involved. I still think buying a home is the best investment any individual can make. Affordability is still at an all-time high,” said Paulson…
Large-scale investors, however, may not be behind the surge in home flipping. They may, in fact, be the cause of it.
…” the flippers are kind of the in-between middleman who is getting the property into good rentable condition and then selling to the institutional investors”.
Home flipping was a key feature of the US housing market prior to the sub prime crisis. One can only wonder whether the market is setting itself up for another fall in the event that mortgage rates continue their climb off the canvass (see next chart).
