The demise of a formerly hot home market, torn apart by increasing mortgage interest rates, is now beginning to affect a once thriving home-flipping environment.
With interest rates now over 7%, home flipping, which hit new heights in early 2022, has dropped as the real estate market shifts. Home sales have fallen 25% since September 2021, according to the National Association of Realtors (NAR).
Meanwhile, ATTOM Data Solutions, a leading curator of real estate data nationwide, has also released its second-quarter 2022 U.S. Home Flipping Report, which showed 115,198 single-family houses and condominiums in the United States were flipped in the second quarter. Those transactions represented 8.2% of all home sales in the second quarter of 2022 or 1 in 12 transactions. Those numbers show a decrease of just under 10% compared to the rate of 1 in every 10 home sales during the first quarter of 2022. And although that number still represents the third-highest level since 2000, some are issuing a warning siren.
“Anybody that’s flipping right now needs to be looking closely at the pricing of property: Price it to sell. Today is not the time to get greedy,” Capital Fund I President Noah Brocious told Bloomberg News. Capital Fund I is a hard-money lender that does business in Phoenix, Colorado and Texas.
ATTOM Executive Vice President of Market Intelligence Rick Sharga has similar concerns. “The big question is whether the fix-and-flip market will begin to lose steam as overall home sales have declined dramatically over the past few months, and the cost of financing has virtually doubled over the past year.”
Most home flippers are small contracting companies that buy the homes, add improvements like new counters, paint and flooring and sell them at a profit.
And for now, many are being protected by old-fashioned cash, with some buyers still in the market looking to land deals without the help of banks and mortgage companies, according to Lawrence Yun of the NAR.
“People who have cash are still in the market, and with less buyer competition, they see better opportunity,” Yun said.
Another bright spot for home flippers: More distressed properties are coming on the market now that pandemic-era foreclosure bans have expired.
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