Some Say Flipping is Hurting the Housing Market

The people saying that certainly aren’t engaged in flipping. Watching the house flipping “reality” shows on TV, it’s no wonder that everybody and their brother wants to jump into flipping. After all, it’s easy to grab up a dilapidated bargain, slap on some paint and new countertops, and sell at a big profit … right? Maybe.
Redfin pulled some average flipping profit numbers that certainly seem to bear out that it’s a major profit generator for many. The top 27 markets averaged $90,200 in profit per flip in 2013. California dominated the top of the list for average per-flip profit with:
• San Francisco $194,600
• San Jose $152,000
• Oakland $134,500
• Los Angeles $126,100

Pent Up Demand Not for Buying, Definitely for Rentals

Take a look at any recent or even past marketing or market-related reporting coming from NAR, the National Association of Realtors, and you’ll find that it’s always a good time to buy a home. Right now with dismal sales, a lousy economy, and almost no first time home buyers anywhere to be found, just where is the “pent up buying demand” that the industry wants so much to promote? By promising that demand is about to spike, it makes some people feel safer in buying and expecting prices to appreciate.
Unfortunately, almost no data exists to support this theory. People aren’t buying or selling homes for a number of fundamental reasons:
• They’re insecure in their jobs.
• They’re experiencing wage increases below the inflation rate.

This Week’s Short Stories

New Cities, but Also Moving Downtown
The first article in this issue addresses companies moving to attract younger workers who want a big city lifestyle. There’s another trend however, as in just about all cities all workers are moving closer to the center of the city and the activity. They’re leaving suburban areas and commercial buildings are beginning to go to empty status in the suburbs.

More Homeowners Becoming Landlords

Cash Home Purchases & Low Demand for Mortgages the New Normal

It’s not new news that a major chunk of home purchases are being made with cash. For several years now, there’s been a steady 30%+ of cash home purchases fueled by investor demand. This is more true than we can prove with hard numbers, as many deals over the past few years were “off the books” in a way. Investors were buying before homes hit the MLS, buying directly from banks, and thousands of homes were purchased in bulk deals. Many of these are not in the data that reports that 30% number.

Worker Availability Changing Where Business Locates

The title could easily indicate a movement of business in a local area to accommodate where people want to live. However, there is another and much larger trend that’s changing where businesses locate by much larger distances.
According to a report from Cushman & Wakefield titled “Human Capital: The War for Talent and its Effect on Real Estate,” there’s a massive shortage of available workers between the ages of 18 and 64 developing in many areas of the country. The report predicts that this trend will cause a lot of changes in real estate markets over the next couple of decades.

This Week’s Short Stories

Interest Rates Move Strongly Downward
On Jun 12, interest rates moved downward following a well-received 30-year Treasury auction. The most commonly quoted rates are:
• 30-year fixed at 4.25%
• 15-year fixed at 3.375%
• FHA/VA at 3.75%
• 5-year ARMs at 3.0 to 3.5%
Low rates seem to be the norm for now.

What Today’s Renters Want
There are only two shorts this week, as this one is a bit longer and in two parts.
1. Survey of renters shows they most want:
a. To pay using debit and credit cards.
b. Fitness centers.
c. Wireless Internet access.
d. Open floor plans.
e. Pet perks, like pet park or walking areas.
f. Safe and ample parking.
2. What they’re considering when choosing location:
a. Transportation needs.
b. Safe neighborhoods.

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