Skip to comments.The Growing Bubble in Flipping Houses (Your House not Included)
Posted on 10/21/2013 11:00:04 AM PDT by Kaslin
Flipping houses went out of fashion around 2008, along with flip phones and sub-prime mortgages. But real estate data shows the practice is on the upswing among million-dollar homes.
At the low end, where flipping might actually make some economic sense, flipping is down.
MarketWatch reports House flipping makes a comeback
For the market as a whole, flips of single family homes fell 13% in the third quarter, according to new research from RealtyTrac, with investors earning a gross profit of nearly $55,000 on each property. But at the higher end of the market, homes seem to flip as quickly as a griddle full of hamburgers. Flipping increased 34% among homes worth $750,000 and over, 42% among $1 to $2 million houses, and 350% for properties worth between $2 and $5 million.
Flipping tends to be most common in cities with a large supply of expensive homes. (To qualify as a flip, a home must be purchased and subsequently sold again within six months.) In fact, more than three-quarters of all high-end flipping took place in five markets: The New York metro area and Los Angeles, San Francisco, San Jose and San Diego.
Whats behind these quick turnarounds? Flipping happens when prices are rising rapidly even if price levels are low, says Jed Kolko, chief economist for real-estate firm Trulia.
Its possible to double the value of a home, says Jeff Salgado, a San Francisco-based realtor. Investors could buy a dilapidated home for $1.2 million, invest $600,000 and sell it for $2.4 million, he says. Our buying community is driven by the biotech and high tech sectors. These people are brilliant at what they do, but a good portion of them dont know the difference between a screwdriver and a hammer.
When asked to comment, Bernanke replied "It's not a bubble, it's bubblicious". Well ... not quite.
But signs of a bubble are all over the place. And just as in 2000 with the dotcom bust, and 2007 with the real estate bust, the Fed is 100% oblivious of massive bubbles now.
Alternatively, the Fed harbors a "We Just Don't Care" attitude, hoping employment picks up before the stock market, corporate bond market, and housing bubbles burst.
Regardless, bubbles never end well (except for bank executives and corporate insiders who cash out stock options and sell every share on the way up).
Oh, it’s coming alright. You can’t have a nation of bad employment, faked unemployment figures and “healthcare” reducing folks to part-time and NOT have it coming.
I just sold my mother’s house in central CA for $16k MORE than the asking price — all cash, as is. It either will be flipped, or rented. I’m so glad to get rid of it because we had a break in-in July. Meth heads trashed the place and stole a lot of her things.
But, this means that we can visit Mom in her assisted living home without worrying about, or working on, her empty house! Halleluia!
This article has nothing to do with homes like you and I own. This is about flipping multimillion dollar homes. These are houses bought by the 1%.
Flipping regular homes has gone down because banks will not lend you money unless your credit is perfect. So unless you have a $200K-500K liquid cash, it is hard to flip a house now.
There have been many opportunities in the last year to flip a house IF you have the cash. I could have bought a house last year that Fannie Mae owned in my town. They ended up selling this 3400 sq ft house for $270K. It just resold, 6 months later for $408K. The only thing they did to it was repaint, refinish the floors and remove a hot tub. They probably spent less than $10k fixing it up. Not a bad profit for a 6 month investment. Again, you have to have money to make money.
This is the line in the article I’m referring to:
“At the low end, where flipping might actually make some economic sense, flipping is down.”
There are SO many houses in my area right now that are very ripe for flipping (buying, a little fix up, sell). I wish I had the money for it.....