House Flips hit 10-yr high! What do you think about the market?
Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votesHouse Flips hit 10-yr high! What do you think about the market?
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Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
9yOriginally posted by @Diane G.:
@ Russell Brazil - I think you are 100% on...
Just this past weekend, 3 of my friends who were aggressively looking to buy to live in (home buyers, not investors) told me they are not looking anymore due to the uncertainty brought on by our new president....Now that is 100% of who I know are looking to buy....
If a good % of people feel the same way, and hold off on their purchase, it is going to push the economy into a recession sooner and harder than what is due anyway....
Be patient....
I am sorry, but your three friends don't make the whole country. Perhaps they haven't looked at the stock market lately to see how rest of the country is feeling about the new administration?
Look at the consumer confidence data. Its at all time high. http://www.tradingeconomics.com/united-states/cons...
And how does exactly few people doing deferred purchase put the whole country in recession..
I was going to take a cheap pot shot at California liberals in general, but may be some other time..LOL
44 Replies
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes9y
I believe our local market is pretty frothy. Talked to a flipper this morning (I finance some of his deals) and he stated sales have slacked off. He is now considering building and then selling. He states he wants to build houses in the 145K range. I am supposed to meet with him later this week. I did just fund a flip with another BP member and will mention the results after the deal is sold. As to 2007-2008 I saw a lot of local investors lose everything.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
Housing market is on fire in a lot of areas. Unemployment rate is below 5%, low interest rates, Growing incomes. So there are economic fundamentals for it to be this way. Especially in markets like Denver and Dallas which are experiencing huge amounts of population growth.
We are probably due for a recession anyways, but the political atmosphere could push us into one quicker, and maybe a little harder than in a normalized environment. However what happened a decade ago was likely a once in lifetime occurrence. sure prices could go down, but not in the amounts they did from a decade ago.
I was doing some flips up til 2006, and then moved from Boston to DC. which took me out of the game for a but at the right time.
I could see new construction getting hammered in Denver, Dallas and other growing markets if we hit a recession, which could in turn lead to less mobility in moving populations. Commercial I think we be more sensitive as well.
District Invest Group545 Reviews - Atlanta, GA · Member since 2016 · 44 posts · 9 votes9y
For a newer investor primarily interested in fix and flip rehab investing, would you say that within the next year would be a great time to start a rehabbing business? I know the market changes based on demographics but it seems like over-all the market for fix and flips has continued to go up. Any thoughts?
- 9yJames MasottiPro MemberRental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
While I certainly lack the extensive knowledge and experience of @John Thedford and @Russell Brazil I can definitely say that the market near me has become rather competitive and I feel as though prices are pushing very far upward. As a loose reference point my wife and I have been considering buying a new house, but living in NJ with our high property taxes a move from our current town house to a single family home would cost us an additional $250 if we purchased a SHR at the same price as our townhouse, just due to the increase in taxes. However add to that the reason we're looking is to get more space and that we currently have a 4% 30 year mortgage we'll be looking at a slightly higher interest rate and a house that is $40k-$80k more expensive and a new home will end up costing us $600-$800 more a month if we don't end up putting 30-40% as a down payment.
When I started look into flipping in my local market last year there are a lot of seasoned flippers who are buying cash and turning things pretty quickly. I'll get there someday but for now I'll be sticking to the market I know and has prices in line with what I'm able to actively work.
- @ Russell Brazil - I think you are 100% on... Just this past weekend, 3 of my friends who were aggressively looking to buy to live in (home buyers, not investors) told me they are not looking anymore due to the uncertainty brought on by our new president....Now that is 100% of who I know are looking to buy.... If a good % of people feel the same way, and hold off on their purchase, it is going to push the economy into a recession sooner and harder than what is due anyway.... Be patient....
- Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes9y
Originally posted by @Diane G.:
@ Russell Brazil - I think you are 100% on...
Just this past weekend, 3 of my friends who were aggressively looking to buy to live in (home buyers, not investors) told me they are not looking anymore due to the uncertainty brought on by our new president....Now that is 100% of who I know are looking to buy....
If a good % of people feel the same way, and hold off on their purchase, it is going to push the economy into a recession sooner and harder than what is due anyway....
Be patient....
I am sorry, but your three friends don't make the whole country. Perhaps they haven't looked at the stock market lately to see how rest of the country is feeling about the new administration?
Look at the consumer confidence data. Its at all time high. http://www.tradingeconomics.com/united-states/cons...
And how does exactly few people doing deferred purchase put the whole country in recession..
I was going to take a cheap pot shot at California liberals in general, but may be some other time..LOL
- 9yKuba F.Pro MemberReal Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
Increased interest rates by themselves may not have a detrimental effect as history tells us that people will find a way to pay for a house if they're looking for a house. But that being said, when combined with other inflationary policies that increase the cost of goods, and a reduction in the affordability of healthcare will definitely make it more difficult for people to be able to afford mortgages. We're also seeing increased supply in some rental markets, which will create downward price pressures overall I think.
- Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes9y
Originally posted by @Chinmay J.:
Originally posted by @Diane G.:
@ Russell Brazil - I think you are 100% on...
Just this past weekend, 3 of my friends who were aggressively looking to buy to live in (home buyers, not investors) told me they are not looking anymore due to the uncertainty brought on by our new president....Now that is 100% of who I know are looking to buy....
If a good % of people feel the same way, and hold off on their purchase, it is going to push the economy into a recession sooner and harder than what is due anyway....
Be patient....
I am sorry, but your three friends don't make the whole country. Perhaps they haven't looked at the stock market lately to see how rest of the country is feeling about the new administration?
Look at the consumer confidence data. Its at all time high. http://www.tradingeconomics.com/united-states/cons...
And how does exactly few people doing deferred purchase put the whole country in recession..
I was going to take a cheap pot shot at California liberals in general, but may be some other time..LOL
Regardless of real estate, this is some funny **** right there :)
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
@Chinmay J. one thing you are overlooking here, as is many with the so called Trump rally, and by many I mean the media, while those in the financial world are acutely aware of is the very basic fundamental is that when the bond market goes down the stock market goes up and vice versa. After the election there was a huge huge drop in the bond market, as we can also see in the interest rate spike. The size of the bond market far and away eclipses the size of the stock market. So while I dont know the exact numbers, I bet hundreds of billions flowed out of the bond market, and some of that money, say tens of billions founds it way into the stock market and pushed those prices higher. So was the stock market happy about the election and direction of the administration....or was it really the bond market being much more unhappy about the election and direction of the administration.
This isnt really the forums for political discourse, but there is some clear overlap that is hard to completely avoid, especially if we are talking about the way markets react to the political environment.
District Invest Group545 Reviews - Investor · Springfield, MA · Member since 2010 · 277 posts · 84 votes9y
Housing market is still in an uptrend in my area. I am starting to see an increase of house flippers entering the market in the last 3-4 months. My take is there is at least another two years before my home area is saturated.
I just recently wholesaled two deals in the matter of days and had a property listed for retail sell in the first week.
I am also in the Hartford market with some higher end homes and I am finding that area to still have very strong demand.
But there are stagnant markets around me that I have some properties that were on the market longer than I would like so we just put them in our pool of rentals.
- Caldwell, ID · Member since 2017 · 2 posts · 0 votes9y
I did a couple of flips back then, I ended up holding and carrying the contract on it and flipping the other one.
- Caldwell, ID · Member since 2017 · 2 posts · 0 votes9y
John Thedford in my area of the country its the opposite there is more demand than inventory, houses sell fast
- Investor · Edwardsville, IL · Member since 2015 · 432 posts · 481 votes9yIt really surprised that flipping was increasing given the tight inventory that exist. One of the small markets that I invest in normally will have 30 houses that meet my criteria. Today there are only 7...all junk. I think part of the reason that flipping is at an all time high is all of TV shows. A lot of people watch the shows and think to themselves "I can do that too"! How many first time flippers flip a second house? Attention newbies, flipping a house is a hard JOB with plenty of risk!
- Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes9y
The flipping market is super competitive in NW Indiana right now! Inventory is low so investors are having to pay higher prices for property. We are actually starting to see lower quality flips because of it. Investors don't have as much money to put in the properties so they are cutting corners to maintain profits.
- Rental Property Investor · Hailey, ID · Member since 2015 · 218 posts · 143 votes9y
Market is sensitive.
As Nassim Taleb points out in 'The Black Swan', it'll probably an event that no one could really see coming that really triggers a market reversal. It almost always is.
There are always warning signs and triggers.
Your next question is probably 'What are those warning signs and triggers?'
Quite frankly, the everyday investor is a couple billion dollars shy of having access to that information.
- Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes9y
Available inventory to purchase to flip has slimmed down, and credit has loosened allowing more newbie flippers in the game. Supply down + demand up = time to move away from flips!
We're looking at selective flips at higher price points, more buy and hold, and new construction.
What's that old saying.. when other people are running in, run out; and when other people are running away, run in...
In my neck of the woods (Las Vegas), it looks to me like typical gross rental yields are around 7%-ish, which doesn't seem extremely low or high. Interest rates are just coming up off of historic lows (which I think has spurred some "buy-now-or-it'll-be-too-late" purchases), but I keep thinking though, that President Trump's trade policies would benefit from a weaker dollar, which is synergistic with his plans for increased infrastructure spending. Also, Yellen's term at the Fed is up for 2018, at which point I'd guess Trump will replace her with someone more in favor of lower interest rates. Right now, I wonder if Yellen is planning on keeping interest rates low in order to increase her chances at keeping her job at the Fed. Consumer confidence is indeed very high (even higher than in 2006), and the local real estate investment club meetings are packed with enthusiastic investors and speculators; I don't see think consumer confidence or investor confidence are good leading indicators, though. I saw a tiny decline in January's $/sqr foot figures compared to December in the local assessor's data, but that could be a minor statistical fluke. Still, as an investor in the U.S., faced with the possibility of high inflation and trade wars that might tank foreign economies and foreign stock markets, what can you do except to stay invested in local stocks or local real estate and hope whatever you're invested in will at least keep up with inflation? With regards to flipping, I've heard that it's gotten harder to find good deals, because there's a lot of competition for those deals, which makes profit margins rather slim.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes9y
Take their numbers with a grain of salt. The methodology used in by Zillow and Trulia allows for counting some new construction as well as "flips". Their methodology, per their page, says they don't count the clearance flip properties, but doesn't mention builders. Here's an example in Wake county, in Holly Pointe subdivision from 2015. You can see the same for 2016 from this and other builders:
Current HOMEOWNER, JONATHAN & ALANA 06-05-2015
1 Back GARMAN HOMES LLC 01-22-2015
2 Back HOLLY POINTE LLC 06-07-2007Garman Homes, LLC is not a flipper IMO. But count it! Because the criteria for a "flip" which is "purchase of a house at market rate and selling it at a higher market rate price, because of improvement to the property and/or rising prices..." Builders certainly sell at a higher rate. Places experiencing a housing "recovery" will see some property identified as a "flip" when it is new construction. So numbers will appear higher than they actually are in "recovery" areas.
See more at: - Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes9y
Originally posted by @Russell Brazil:
@Chinmay J. one thing you are overlooking here, as is many with the so called Trump rally, and by many I mean the media, while those in the financial world are acutely aware of is the very basic fundamental is that when the bond market goes down the stock market goes up and vice versa. After the election there was a huge huge drop in the bond market, as we can also see in the interest rate spike. The size of the bond market far and away eclipses the size of the stock market. So while I dont know the exact numbers, I bet hundreds of billions flowed out of the bond market, and some of that money, say tens of billions founds it way into the stock market and pushed those prices higher. So was the stock market happy about the election and direction of the administration....or was it really the bond market being much more unhappy about the election and direction of the administration.
This isnt really the forums for political discourse, but there is some clear overlap that is hard to completely avoid, especially if we are talking about the way markets react to the political environment.
You are spot on regarding what happened. The yield on 10 yr Treasury went from 1.77% to 2.43% (which is what its at right now), and the S&P index jumped about 6%. As we all know, the market almost always overreacts. Stock Market overreacts and bond market also overreacts from time to time. Its easy to tell why the Stock Market acted in the way it did. Investors saw US as a better place to do business. Whether bond market was truly panicking (I am sure there were some of those),or the bond investors saw better yields (opportunity) to make money in the Stock Market (I am sure there were some of those also) is the gray area. Such reaction was imminent anyway, given the shock waves it sent through the media and world when Trump won. Eventually, I am sure the bond markets will settle down to a new normal, and Stock markets will come down a little bit. Markets always love equilibrium in the long term.
To suggest that the election results will lead to full blown recession as suggested by some posters is just overreaction, simply paranoia, or wishful thinking on one's part.
I believe that the administration's business polices will be a lot more business friendly, although the administration's rhetoric will be somewhat extreme. That's just the Trump brand.
- Real Estate Broker · Springfield, IL · Member since 2014 · 7 posts · 1 vote9y
The markets I study are hot right now. Very strong seller markets! Low inventory is causing prices to go up and houses to sell fast. Low interest rates are also contributing this. Now is a great time to be flipping houses. What goes up must come down though. My personal belief is we have more growth yet to be seen before we see a downward shift. As many others have said though, that depends strongly on politics. With the possibility of Dodd-Frank being eliminated by our new president I would not be surprised if we see the market continue to inflate. Be cautious though, every bubble eventually pops.
- 9yAnthony GaydenPro MemberRental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
A lot of inexperienced flippers will probably pay too much for properties and lose money.
It could drive up prices. - Realtor · Farmington, MI · Member since 2016 · 129 posts · 69 votes9y
Hello Mindy:
Detroit Metro is HOT !
Greater Detroit Metro Area gets a bad rap from Brian, Josh on Podcasts. :-(
I'm active in REIA meetings and Real Estate Investors are happy making deals.
So all is well in the Detroit Metro Area. Detroit like many inner cities have issues. Let's leave it at that.
CNBC Article proves otherwise.
Old style Manufacturing base is essential for the whole economy because it cause something Real and Tangible. A healthy Manufacturing means jobs lifts the entire manufacturing base and the people employed by them and other support services and people who are employed buy homes.
Had it not been for the bailout of GM and Chrysler the entire Mid_west would have collapsed. (No Trolling Please)
Personally, flips is not something I'm a fan of maybe BRRR maybe.
Time to consider Contrarian approaches, deals are hard to come are plenty there for the takers.
Thanks
Kishore. P
I think there are many factors we have to consider here, but here are a few that I think are key. One is the election year, which historically slows markets down, but is usually followed by a nice recovery due to all the uncertainty. Second, and I'm speaking from my personal lending experience here, is this time of the year is a little slower than most. 13 years of lending and it usually picks up around April. Third, is speculation. Everyone has their personal opinions about the President, the economy, and current market conditions which will play into their business decisions. At the end of the day, deals are always available in any market and some will win, some will lose.
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