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Flipping Homes Back To 2005 Levels

Tyler Durden's picture





 

A month ago when we presented RealtyTrac's analysis of 25 markets where flipping homes is most profitable (yes, they really did that) some thought we were joking: after all can people really be that stupid and forget the crushing aftermath of a housing bubble that popped just seven short years ago driven by the very same underlying factors as the second housing bubble we are experiencing right now. Apparently when the entire economy is flooded in cheap Bernanke (and Kuroda) bux, not only they can, but they will and damn fast too. As for the consequences: this time will surely be different. Either way, we were not joking and as the WSJ followed up on just this topic earlier today, it turns out that house flipping is now back to levels last seen in 2005.

The WSJ reports:

In California, the number of homes sold in recent months that had been flipped—or bought and resold within six months—has reached the highest levels since late 2005, according to PropertyRadar, a real-estate data firm. About 6,000 homes have been flipped in the state this year through April, or more than 5% of all homes sold statewide.

 

While flipping is re-emerging nationwide, brokers say it is happening most in California, where home prices have risen sharply over the past year. Six of the 10 largest price gains in major U.S. cities over the past year have been in California, according to Zillow. In April, home values rose by 25% from a year earlier in San Jose, San Francisco and Sacramento, and by 18% in Los Angeles.

Is there any magic behind the process of buying in order to sell? Nope:

"When prices rise, this trade works. It's not anything more sophisticated than that," said Christopher Thornberg, an economist with Beacon Economics in Los Angeles.

Just in case there were doubt as to how profound human stupidity can be, some are actually debating whether the current flip that house mania is good or bad.

The industry is split over whether the current flipping activity could lead to potential problems. Jed Kolko, chief economist and a vice president at Trulia Inc., an online real-estate site, says the current activity isn't indicative of a bubble. "A bubble is when prices are rising fast from high levels," he said. "We're not there now."

As explained earlier, those doing the flipping are mostly the same asset managers who have access to unlimited funding.

Today's flippers are stronger financially. Flipping homes requires lots of cash because banks aren't making loans to investors who don't have large down payments. While some investors have bought many homes that can be rented out, it usually isn't feasible financially to rent out more expensive properties.

No, they are not stronger: they just happen to be large financial institutions who buy and sell from each other in lieu of a greater fool appearing. Very much just like the S&P. Problem is the same institutions are now starting to quietly get out of the market, seeing how it ends. Everyone else: best of luck.

It gets worse:

Competition for homes "is reaching bubble proportions, and I'm very wary of it," said Rich Worcester, a real-estate agent in San Diego who flipped about 25 homes last year for himself and clients. Mr. Worcester is representing a colleague who paid $675,000 last month for a foreclosed three-bedroom home in San Gabriel, a Los Angeles suburb. After installing new appliances, relandscaping and staging the empty house with furnishings, it hit the market for $867,000 earlier this month. Mr. Worcester said it hasn't yet received any offers, and he conceded he may cut the price.

 

Investors generally make all-cash payments, which gives them an extra advantage over buyers who must complete a lengthy mortgage-approval and home-appraisal process.

 

Robert Ganem beat out four other offers this year when he paid $600,000 for a short sale—in which a home is sold for less than the amount owed on its mortgage—in Ladera Ranch, in southern Orange County. He made cosmetic renovations—fresh paint, new hardwood floors and kitchen tiles—before selling it a few weeks later for $755,000.

Greed may be good, but it is not for those who just want to buy a house for a much more trivial task: to have a place to live.

Meanwhile, the growing competition from investors is unwelcome news for ordinary buyers. After waiting years for prices to hit bottom, "buyers are jumping in before prices bounce so high they can't afford it," said Christine Donovan, a real-estate agent in Costa Mesa, Calif.

 

Parviz Goshtasby, who moved to Southern California three years ago, is finding few homes available to entry-level buyers in Newport Beach, where starter homes can begin at $800,000. "I slowly realized that I can't compete with these investors," said Dr. Goshtasby, a plastic surgeon.

 

After three unsuccessful offers, he agreed to pay $1.6 million for a home in January after the seller agreed to finance a 10% second-lien mortgage, but the deal fell through when the seller later got cold feet. Two weeks ago, he offered to pay the $1.2 million asking price on another home that ended up selling to a cash buyer.

In short: deja vu, all over again. And just like last time, this too will end in tears. Only this time there will be no Fed to bail out the financial system. After all the same financial system only exists now because not only the Fed, but every single central bank have gone all in on doing just what the above described: reflating one final bubble.

We would urge everyone to just stay away from this idiocy, same as the centrally-planned, manipulated, broken stock market. However, for those habitual gamblers who just can't here is the handy guide we presented a month ago - where the profitability of flipping houses is highest in the US.

 


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Wed, 05/29/2013 - 18:59 | Link to Comment Cdad
Cdad's picture

"When prices rise, this trade works."

And then suddenly...it doesn't...what with leverage being all sucky and what not.

Toss in some negative cash flow and...viola...suck city.  

And then the phone starts ringing at midnight with calls about backed up drains.  This pisses the accountant off even more as he tries to find some jobless sucker to go 24 hours on the call sheet...for $9 bucks per hour.

Right about then, the federal government jumps in, taking away your tax credit or something.  Maybe something revolutionary comes out of dying Freddie...or equally gasping Fannie...and then it all gets really good.  In some sorry assed bid for relevance, some R goes all shizzle with some notion about trying to get along with the Ds.

About then you'll learn about some loan program for "new home buyers" or some other such constructed thing.  You find yourself leafing through the yellow pages for a realtor unconsciously.  

Right about then, you relearn the old poker adage.  If you can't figure out who the sucker is in the first half hour, you're it.  And as you remember this, you'll also remember that two of your renters are in arrears.  

After that comes the Googling of "flipping houses" and "how to close fast"

Welcome to The Recovery.  

Wed, 05/29/2013 - 19:01 | Link to Comment Divided States ...
Divided States of America's picture

Well according to Krugman, an extraterrestrial lifeform will come and bail out the Fed anf probably by destroying all the empty foreclosed homes all over the country in the process.

Wed, 05/29/2013 - 19:04 | Link to Comment markmotive
markmotive's picture

Apparently China is building an 838 meter high building - the world's tallest.

If that isn't a indication we've returned to bubble land, I don't know what is.

http://www.planbeconomics.com/2013/05/energy-czar-on-tesla-flying-cars-a...

Wed, 05/29/2013 - 19:06 | Link to Comment Divided States ...
Divided States of America's picture

means shit....it will be vacant anyway before it disintegrates in a year due to poor quality of building materials.....then they will plan to build a 878 meter high building.

Wed, 05/29/2013 - 19:15 | Link to Comment The Thunder Child
The Thunder Child's picture

9 million homes sitting in shadow inventory foreclosure stuffed lala land. Some people never learn....

 

 

Wed, 05/29/2013 - 19:21 | Link to Comment Promethus
Promethus's picture

 

As it will be in the future, it was at the birth of Man — There are only four things certain since Social Progress began: — That the Dog returns to his Vomit and the Sow returns to her Mire, And the burnt Fool's bandaged finger goes wabbling back to the Fire;
Wed, 05/29/2013 - 19:27 | Link to Comment 12ToothAssassin
12ToothAssassin's picture

A complete economic implosion *IS* the whole plan. How else can you get a Phoenix to rise? Burn the fucker to the ground. Housing bubble, stock bubble, student loan bubble... Thats a trifecta that should start some shit. Mix in a natural disaster or two and BAM! Real Martial law before you know it. (Not the lame martial law we've legally been in perpetually since 9/11)

Wed, 05/29/2013 - 20:01 | Link to Comment FEDbuster
FEDbuster's picture

throw in loss of reserve currency status for the US dollar, just for shits and giggles. 

Then the currency war goes hot, let's just call it WW3 (guess I'm an early adopter?).

Wed, 05/29/2013 - 21:55 | Link to Comment Zer0head
Zer0head's picture

and Blackstone was quietly there when it bottomed and have been following it up whilst pawning it off to rental derivatives

smart emeffers those blackstone folks are smarter than smart

 

Wed, 05/29/2013 - 19:41 | Link to Comment snr-moment
snr-moment's picture

Ok.  The fourth is someone asking whats the fourth, right?

Wed, 05/29/2013 - 21:52 | Link to Comment Buck Johnson
Buck Johnson's picture

And that is why this bubble will take down all the rest that are sitting about to pop (Treasuries, Muni's, pensions, etc.).

Wed, 05/29/2013 - 19:19 | Link to Comment StopIt.Now
StopIt.Now's picture

It's not for housing or people, it's for money laundering.  Look up the ZH article on insane buying of zillion dollar housing as a 'cash stash'.

Wed, 05/29/2013 - 20:45 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

from TFA:

Just in case there were doubt as to how profound human stupidity can be, some are actually debating whether the current flip that house mania is good or bad.

Most people learn at a young age not to put their hand in a fire because it burns.

I would be interested to know if there is a higher incidence among house flippers than there is in the general population of people with a charred stump at the end of an arm.

Wed, 05/29/2013 - 21:27 | Link to Comment noless
noless's picture

They're most likely roping in those too young to remember the idiocy, probably the same ones graduating with worthless degrees and a fuck ton of student loan debt.

Or maybe Americans really are just that fucking stupid.

Wed, 05/29/2013 - 19:57 | Link to Comment razorthin
razorthin's picture

Nothing like bag-holding $100s of thousands or $millions of illiquidity when the market breaks on a dime.

Wed, 05/29/2013 - 20:11 | Link to Comment Prairie Dog
Prairie Dog's picture

who's viola?

Wed, 05/29/2013 - 21:32 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

Viola is not a who, but a what.

Additionally, you need to look at the expression "viola...suck city" in the context in which it exists.

In this instance, "viola...suck city" refers to a quite unpleasant phenomenon in which the degree of negativity one experiences is comparable to being forced to endure for hours on end an excruciatingly horrid quasi-musical performance using a bowed string instrument which is slightly larger than a violin.

Considering that the article is about a festering swarm of house flippers, it is not unreasonable to expect things to progress from "viola...suck city" to a full fledged orchestral horror section of violins, violas, cellos, and double basses known colloquially as a "string section suicide squad".

Fri, 05/31/2013 - 01:42 | Link to Comment Prairie Dog
Prairie Dog's picture

I see what you're saying. I can get along with the Ds, but I find E minor a real problem.

 

Wed, 05/29/2013 - 22:37 | Link to Comment sumo
sumo's picture

Viola = misspelling of French word, voila. Roughly translated: Your Uncle's name is Robert

Fri, 05/31/2013 - 01:39 | Link to Comment Prairie Dog
Prairie Dog's picture

I prefer the other guy's explanation

 

Wed, 05/29/2013 - 18:46 | Link to Comment DaveyJones
DaveyJones's picture

flipping takes on a whole new meaning

Wed, 05/29/2013 - 19:27 | Link to Comment Divided States ...
Divided States of America's picture

Well i remember back in 2007 when the RE agents were flipping homes like mad and mexican burger flippers were living it up like mad (in 5000 sq. ft. homes)

Wed, 05/29/2013 - 21:01 | Link to Comment thatthingcanfly
thatthingcanfly's picture

Man, I'd like to flip HER home.

... if you know what I mean.

Wed, 05/29/2013 - 18:53 | Link to Comment NotApplicable
NotApplicable's picture

At least I can be happy that I live near NONE of those places.

Wed, 05/29/2013 - 19:17 | Link to Comment StopIt.Now
StopIt.Now's picture

Are you homeless?

Wed, 05/29/2013 - 18:49 | Link to Comment atomicwasted
atomicwasted's picture

A whole 1500 homes in a state of more than 30 million plus people.

Yawn.  Wake me up when it's half the homes on any given block, like it used to be.

Wed, 05/29/2013 - 18:52 | Link to Comment NotApplicable
NotApplicable's picture

Well, let's see... the chart is only about 300 away from the peak.

Consider this your snooze alarm.

Wed, 05/29/2013 - 19:08 | Link to Comment atomicwasted
atomicwasted's picture

This tells me that peak is, by itself, meaningless.

 

I'm not saying the Fed hasn't reflated a housing bubble.  I'm saying that worrying about a trivial number of flipped homes in a market that is orders of magnitude bigger is silly.

Wed, 05/29/2013 - 19:17 | Link to Comment Conman
Conman's picture

Anything can be called trivial until its not. I remember that term being thrown around during the lehman crisis.

Wed, 05/29/2013 - 21:29 | Link to Comment noless
noless's picture

Bunch of for sale signs popping up near me, the well maintained ones, not the obviously bank owned ones which have sat vacant for years.

Wed, 05/29/2013 - 18:52 | Link to Comment Temporalist
Temporalist's picture

Lumber down again almost 20% for the month I think.

Wed, 05/29/2013 - 19:52 | Link to Comment Whoa Dammit
Whoa Dammit's picture

I got a quote for a framing package today from our supplier that was higher than 2005 prices. Lumber futes may be headed down, but prices to builders are going the other direction.

Wed, 05/29/2013 - 21:47 | Link to Comment Maos Dog
Maos Dog's picture

Yea, I noticed this too, I am HOPING the prices for us drop after the current stock at the yards starts to be depleted. 

Wed, 05/29/2013 - 18:53 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Great links from Jim Sinclair's site:

« Egaña jumped to her death from a sixth-floor balcony on Friday as a legal team from the local court walked into her apartment to foreclose on her.  Receiving no response after ringing the bell and knocking on the door, a locksmith opened the door, only to find Egaña standing on a chair to jump from her balcony.  Egaña was found alive, but paramedics had no chances of saving her life. »

http://www.forbes.com/sites/afontevecchia/2012/11/09/spanish-woman-commi...

---

Spanish police officer stabs banker who sold him near-worthless bank shares :

« on Sunday, a police officer stabbed a former Bankia employee four times after a heated discussion related to the sale of preferred shares in the failed banking group »

http://www.forbes.com/sites/afontevecchia/2013/05/28/spains-bankia-decim...

Wed, 05/29/2013 - 18:54 | Link to Comment buzzsaw99
buzzsaw99's picture

California is a no-recourse state. They will keep buying for any price as long as the banksters will lend them the money. No risk bitchez.

Wed, 05/29/2013 - 19:16 | Link to Comment StopIt.Now
StopIt.Now's picture

Yea, Feds may not bail quite as much, but who knows, they've had ZERO penalites until now.  Stupid Public votes them in again and again, thinking 'this time' they'll 'fix' it.  Insanity, pure insanity.  They CAUSE the issues, then BLAME someone or some thing, then say "Vote for me again, I'll FIX it!"

Wed, 05/29/2013 - 18:57 | Link to Comment syntaxterror
syntaxterror's picture

It's different this time!!!

Wed, 05/29/2013 - 18:59 | Link to Comment SeattleBruce
SeattleBruce's picture

"Parviz Goshtasby, who moved to Southern California three years ago, is finding few homes available to entry-level buyers in Newport Beach, where starter homes can begin at $800,000. "I slowly realized that I can't compete with these investors," said Dr. Goshtasby, a plastic surgeon."

You know it's tough in fruitland when even the local nip and tuck guy can't compete...

Wed, 05/29/2013 - 19:04 | Link to Comment random shots
random shots's picture

Heaven forbid he has to buy in Coto de Caza or....Irvine!  Won't someone think of the plastic surgeons!

Wed, 05/29/2013 - 19:23 | Link to Comment DaveyJones
DaveyJones's picture

hey, white trash has cosmetic needs too

Wed, 05/29/2013 - 19:34 | Link to Comment nmewn
nmewn's picture

Speaking of white trash, check this guy out...lol.

"Union fat cat Mark Rosenthal spends more time sleeping at his desk than organizing labor, a series of damning photos reveals.

The 400-pound president of Local 983 of District Council 37 — the city’s largest blue-collar municipal-workers union — often downs a huge meal, then drops into dreamland in the early afternoon, members of the union’s executive board told The Post.

“He eats lunch when he arrives at work at 2 p.m. Then, like clockwork, he goes to sleep with a cup of soda on the table and the straw in it,” said Marvin Robbins, a union vice president.

“Then he wakes up, looks at his watch and says, ‘I have to get out before the traffic gets bad.’ He’s usually out by 4 p.m. after being at the office two hours.”

Rosenthal is a former Parks Department employee who rose to power campaigning to rid the union of corruption in the late 1990s.

He last made embarrassing headlines in 2009, when he inspired a City Council bill requiring jumbo-size ambulances for morbidly obese patients after he had a stroke at City Hall."

http://www.nypost.com/p/news/local/labor_big_real_heavy_sleeper_jl3C7gI710FI3XqpEl5o3O

I swear, we're doomed.

Wed, 05/29/2013 - 19:44 | Link to Comment snr-moment
snr-moment's picture

Why?  Where else would you want him, other than a chair?  Managing a lock and dam?

Wed, 05/29/2013 - 20:53 | Link to Comment nmewn
nmewn's picture

I'm thinking the dues paying members who actually work to feed his gluttony would be fine with him "managing" a lock or a dam...in another state.

Wed, 05/29/2013 - 19:49 | Link to Comment gold mans sack
gold mans sack's picture

Rosenthal is not a white surname.  Sounds Ashkanazi to me.

Wed, 05/29/2013 - 20:50 | Link to Comment nmewn
nmewn's picture

He looks white to me. What does an Ashkanazi look like?

Wed, 05/29/2013 - 20:18 | Link to Comment reTARD
reTARD's picture

I know someone exactly like that at the University Medical Department where I used to work. Same size, a good brown-noser, and sleeps at the desk all the time. It really helps that he works at the Dean's Suite where they are always "gifted" with free food and stuff from the big-pharma companies. In fact, other workers have documented his sleeping with photos.

Wed, 05/29/2013 - 20:31 | Link to Comment malikai
malikai's picture

I read about this great worker's hero earlier today.

He's pals with our man Bloomberg.

How do people who supposedly work for a living let a guy like that be their union boss?

Wed, 05/29/2013 - 20:47 | Link to Comment nmewn
nmewn's picture

It would appear there is some palace intrigue going on inside the "workers paradise" of the union hall...again.

The reporter was granted full access to Jabba ;-)

Wed, 05/29/2013 - 19:05 | Link to Comment SeattleBruce
SeattleBruce's picture

"Competition for homes "is reaching bubble proportions, and I'm very wary of it," said Rich Worcester, a real-estate agent in San Diego who flipped about 25 homes last year for himself and clients."

Wait a sec here - he's wary of it, but is caught right up in the middle of the flipping...nice...

Wed, 05/29/2013 - 19:21 | Link to Comment Blano
Blano's picture

As long as he's not the last man standing, he's good.

Wed, 05/29/2013 - 19:01 | Link to Comment AON
AON's picture

way to go ben "bubbles" bernanke.  way to insure that the end buyer ends up paying $100 g's more because of the presence of some scalper who took a real estate course and watched a few episodes of "flip this house"

nice job douchebag.

 

Wed, 05/29/2013 - 19:15 | Link to Comment EscapeKey
EscapeKey's picture

Don't forget that CA's budget deficit now is "almost fixed". One wonders how many state taxes originate from the brick-and-mortar bubble industry.

Wed, 05/29/2013 - 19:07 | Link to Comment SeattleBruce
SeattleBruce's picture

re: Aon: But, but, Ben is just trying to stimulate and help folk get jobs!

Wed, 05/29/2013 - 19:08 | Link to Comment Pancho Villa
Pancho Villa's picture

Feels like the early bubble phase. Like 2004, maybe. I'm starting to get junk mail from lenders who want me to refinance. And just today, I got some spam for a real estate investment seminar. But it isn't crazy like 2006 when I was getting refi junk mail every day and lenders were offering 110% loan-to-value deals with interest-only payment options.

Earth to Bernanke: It's time to tighten. But He won't. No one wants to be a party pooper.

Wed, 05/29/2013 - 19:23 | Link to Comment W74
W74's picture

Like I said a few weeks ago, I've been periodically getting random calls from both lenders and from local real estate agents asking me if I want to buy.

Plenty of hand-made signs on the sides of most of the secondary arteries claiming to want to buy your house in cash (no doubt at a ridiculously low offer, and presumably to rent it out) but I don't know how desperate you'd have to be for one of those to appeal to you.

Wed, 05/29/2013 - 19:08 | Link to Comment John Law Lives
John Law Lives's picture

Blowing bubbles is what Chairsatan considers a successful result of QE?

Where's the price stability?

FedFUBAR.

Wed, 05/29/2013 - 19:10 | Link to Comment EscapeKey
EscapeKey's picture

So Bernanke's plan is for the shitpile of an economy to topple right after he leaves office?
Greenspan called. He wants his blueprints back.

Wed, 05/29/2013 - 19:13 | Link to Comment The Thunder Child
The Thunder Child's picture

I have an ounce of silver that says he will leave the country within 6 months of leaving office.

Wed, 05/29/2013 - 19:21 | Link to Comment W74
W74's picture

I won't take your wager, as I agree with your assertion, but I'll wager you a round that if/when he does leave he makes his way for a beachside home in Tel Aviv.  He'll be more than welcome.

Wed, 05/29/2013 - 19:24 | Link to Comment DaveyJones
DaveyJones's picture

in what kind of box?

Wed, 05/29/2013 - 19:12 | Link to Comment StopIt.Now
StopIt.Now's picture

So those who have the cash and the comprehension of the market have done well, and flipping is great because risk is greatly diminished.  You can flip 100 houses in 7 years, but when the market dives, you may only have a couple where you lose money.

Compare to the massive corporate ownership of 26,000 homes (per another article at ZH) with $4.5B invested, and they are getting OUT, but that will take time.

I wanted to get into flipping, had a great book, but no money.  Got in late as well, became a loan officer in 2007, and I SWEAR that I saw the tied change almost to the day.  It was like going from winter to summer overnight.

The only thing I can think of is somehow, someway, getting lucky enough to get in at the right time.  I'm unemployed AGAIN, older at 52, meaning getting BLATANT age discrimination in my face, and looking at a total meltdown of my future in the ending of the US as we knew it.

Only hope is silver.

Wed, 05/29/2013 - 19:17 | Link to Comment EscapeKey
EscapeKey's picture

Best of luck to you.

Wed, 05/29/2013 - 19:14 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Epic gold rush. We need Mchouses. And giant SUVs and super size fries with that.
Unfortunately you can't fatten up and slim down at the same time: can't have austerity and a credit orgie in the same space.

Wed, 05/29/2013 - 19:22 | Link to Comment pitz
pitz's picture

Eventually the retards will learn the ultimate consequences of repetitive binge-purge-binge cycles. 

Wed, 05/29/2013 - 19:17 | Link to Comment Yardfarmer
Yardfarmer's picture

this is a stratagem of the corrupt Obama administration and similar to the Cloward-Piven plan to subvert the social order by swelling the welfare roles until maximum unsustainability brings the system down. these buyers are just fronting the money to the institutional investors who will pick these future foreclosures for pennies on the dollar before dumping them to federal lending agencies who will eventually own the majority of mortgages in the US. these "free market" shenanigans are the financial version of the NDAA. the corporate/government hegemons are pumping up this latest and last housing bubble for maximum financial leverage over the most essential resource and commodity to the populace. the name of the game is control.

Wed, 05/29/2013 - 19:19 | Link to Comment EscapeKey
EscapeKey's picture

You really think this would have been one iota different under either McCain or Romney?
Obama is just the left-wing face of the Wall St party. If voting really changed anything, they would make it illegal.

Wed, 05/29/2013 - 19:18 | Link to Comment snr-moment
snr-moment's picture

Bull$hit.  This time its for REAL.

 

I'm liquidating the beanie babies and buying in Phoenix!!!

Wed, 05/29/2013 - 19:20 | Link to Comment pragmatic hobo
pragmatic hobo's picture

apparently the bernanke fed believes the bubble should be the norm ... what frigging psycho bastages.

Wed, 05/29/2013 - 19:21 | Link to Comment pitz
pitz's picture

An economy in which 'flipping' houses is profitable, is one that is very sick to the core.  "Flipping" creates no value, doesn't result in the formation of any sort of asset being created, nor does it increase the supply of goods or output. 

Wed, 05/29/2013 - 19:24 | Link to Comment snr-moment
snr-moment's picture

Back in the day, we called that a "service economy"

Wed, 05/29/2013 - 19:38 | Link to Comment Nue
Nue's picture

My cousin was flipping houses. He'd spend 5000 dollars paying some Mexicans under the table to make cosmetic improvements to the house and then jack the price up $30,000 dollars. Wanted me to get in on the action with him but I was born with a disability called a conscience that prevents me from screwing people over.

Wed, 05/29/2013 - 22:50 | Link to Comment sumo
sumo's picture

"An economy in which 'flipping' houses is profitable, is one that is very sick to the core"

Hey, DHS! Check out this anti-patriot! Over Here!

What's good for Wall St is good for America, GOT IT?

Thu, 05/30/2013 - 21:48 | Link to Comment atomicwasted
atomicwasted's picture

I don't know how one can argue that fixing something that's messed up and selling it doesn't add value.  If you broke a window you would destroy value, so the opposite must be true as well.

Wed, 05/29/2013 - 19:31 | Link to Comment Downtoolong
Downtoolong's picture

I've now been on the winning and losing side of direct self-managed real income property investments. The only wisdom I've gained from it is this:

Whether you make money or lose money, it will always be a huge headache until it's over. And, the realtors will always make more money than you in the long run, unless they are dumb enough to try and get in on the investment themselves.

 

 

Wed, 05/29/2013 - 20:15 | Link to Comment Tortfeasor
Tortfeasor's picture

You gotta be pretty dumb to make less $$ than a realtor.

Wed, 05/29/2013 - 19:26 | Link to Comment denverdolomte
denverdolomte's picture

I can tell you here in Denver this is actually true. Houses in my neighborhood 5 years ago were selling for under $125k on the high end and the needed work, people add $18k to the house and yard now are turning and selling the houses for $250k on my street. My friends house down the road about 5 houses, he paid $195k for his house, just got a letter from the city that his property had appreciated in value to $225k within 1.5 years time. It's kind of insane out here with how its working, it's not fun when all the money from the rest of the country starts to collect in one small pocket.

Thu, 05/30/2013 - 02:23 | Link to Comment Nue
Nue's picture

It's like Vegas.

You get a little Money. You head to the Casino, You win a little money the House comps your meals and your drinks, then you lose your ass and in turned are kicked out on it, Then after a period of soul searching. You get a little money you head to the Casino......

Wed, 05/29/2013 - 19:37 | Link to Comment GrinandBearit
GrinandBearit's picture

This is so absurd and bizzare.  They are blowing the same housing bubble they blew in 2002-2006.

Seems there are many people out there with selective amnesia.

This next crash in going to make the last one seem like picnic.

Wed, 05/29/2013 - 20:00 | Link to Comment pitz
pitz's picture

This time its a new set of victims/suckers though.  Because it sure as heck isn't the legions of people still in negative equity who are doing the flipping. 

Wed, 05/29/2013 - 19:41 | Link to Comment PiltdownMan
PiltdownMan's picture

They call them Flippers, faster than lightning.

Wed, 05/29/2013 - 19:45 | Link to Comment hairball48
hairball48's picture

How many times will the sheep have to learn that a fucking house is a place to live in, period.

Wed, 05/29/2013 - 20:06 | Link to Comment 22winmag
22winmag's picture

No more flipping guns... prices have been dropping like a stone for the last 2 months.

Wed, 05/29/2013 - 20:30 | Link to Comment Joke Heros
Joke Heros's picture

Flashbacks to the mid 2000's when I was hearing people say "Home prices are going up, if I don't get in now I'll get priced out!'

Or "The house has a whole bunch of bids going so I better raise my bid price!"

Or "Hair stylist/realtor/janitor so and so is flipping homes by paying undocumented workers to fix up homes and is making bank!"

I'm starting to hear the same shit from the same types of people nowadays. My house is Zillow'd at about 120k, 2 houses down, same floor plan, same lot size, they are asking 180k and apparently a bidding war just started. People are even acknowledging most of the action is from banks or cash investors, but they want to play against them (and they WILL lose) but they don't care.

This would be the third housing bubble in this part of southern CA (Inland Empire) in the last 20 years. Fvcking pigs.

Wed, 05/29/2013 - 23:18 | Link to Comment snr-moment
snr-moment's picture

Consider yourself lucky.  Get out now, while you still can.

Wed, 05/29/2013 - 20:34 | Link to Comment I need Another Beer
I need Another Beer's picture

Honey ! Flip me another beer !

Wed, 05/29/2013 - 20:40 | Link to Comment hidingfromhelis
hidingfromhelis's picture

If one were to apply a critical eye (or calculator) to the chart on the top 25 markets for flipping, it actually doesn't look that great.  Let's assume a 25% gross profit on a $250,000 sale.  More than half the table doesn't have that much of a profit.  Most flippers are listing with and paying real estate agents in order to reach the most people the fastest and hopefully getting the property off their hands quickly.  25% sounds good, right?  Well, by the time one pays about 8% for listing fees, title insurance, and escrow, the gross profit is now down to 17%.  $42,500 profit sounds great, right?  

Not so fast...  Now we need to deal with materials and labor to bring the house up to financeable and marketable condition.  Very, very few properties will get away with just cutting the grass and splashing a little bit of paint on the interior walls.  Let's say it's an easy one and only requires $15,000 of materials and labor, and most flipped houses probably need a lot more than that.  Now, we're approaching 10% net profit without even getting into carrying cost, opportunity cost, and unanticipated expense risk.  

If you have cash and are better than average at selecting a property and controlling your costs, yes, you can make money.  I have a feeling a lot of people aren't making what they thought they'd make by flipping.  One might be better off selling seminars on flipping than actually doing it.

Wed, 05/29/2013 - 20:48 | Link to Comment RSDallas
RSDallas's picture

Well I have a bit of an issue with this article and similar articles that are focusing on this so called flipping issue.  There is a legitimate business for some of us who purchase homes from either distressed owners or banks make the necessary repairs and updates and then place them back on the market to, yes, make a profit.

These homes are usually in pretty bad condition or have never been updated and as a result of that they are going to sell at big discount.  Shame on the previous owner.  Their outcome should not be a surprise.  These are usually homes that regular buyers tour on a day to day basis.   They are listed in the MLS.   The reason they don't buy them is because they look like shit and 90% of the buyers do not have the money nor the experience to bring the property up to a condition that meets their expectations.  90% of the home buyers want to purchase a home, close on it and move right in.  Then 50% of these homeowners never make a repair or update to their homes, but they become a victim when they can’t sell it.  All I can say is one person’s bad real estate decisions can be another person’s good real estate decision. 

These hedge funds and corporate real estate investors are getting what they deserve.  Buying Residential Real Estate is not a good fit for any hedge fund or corporate entity.  Successful Real Estate Investors are usually self-employed independent entrepreneurs, maybe with a small number of partners, but never a corporation or hedge fund.  There are way too many unforeseen costs in purchasing Real Estate.  It is my understanding that these hedge funds are purchasing hundreds or even thousands of homes sight unseen.  Think about that.  They are getting what they deserve. 

Now is this space beginning to get crowded again, yes it is.  A better market always brings out the Real Estate want a bee’s.  Hopefully they will, like many before them, get stung and go away after they get stuck with that one house that they can’t sell.

So it my humble opinion that you should concentrate your criticisms on the cause and not the result.  The cause is, was and will continue to be the decisions being made by Ben Bernanke and his gang of thieves.  OOPS, I mean our so called National Leaders. 

 

Wed, 05/29/2013 - 21:39 | Link to Comment Prairie Dog
Prairie Dog's picture

I thought your comment was far to sensible and rational to belong here, until I got to the obligatory abuse of Bernanke at the end. So record-low interest rates are promoting activity and creating profitable trading opportunities in a housing market that by all fundamental and historical measures is undervalued. I fail to understand why this is a bad thing and how that makes Bernanke and the rest a gang of thieves. I'm obviously far too naiive for this sophisticated company. Not knowing any better, it looks like sensible polcy making to me.

 

Wed, 05/29/2013 - 22:16 | Link to Comment RSDallas
RSDallas's picture

Excuse me and respectfully, you are a bit challenged if you can't see the criminality of what Bernanke and the gang have and continue to do this Nation and its Citizens.  The banking industry today silently announced that it made record (that is RECORD!) profits.  Any sane individual has to ask themselves how a bank (TBTF Bank at that) is making RECORD profits in the economy we have??  I have nothing against profits or losses, but give me a break.  Several of these banks (if not all of the big 5) should have failed when the crises hit in 2008.  This Fed and the US government kept a thieving industry alive.  For what?  I order that they (the Fed) could criminally re-capitalize them at the expense of all of us in the US who have been and remain being financially responsible to ourselves and our families.  The Fed is an independent entity, you fool.  They have one purpose and one purpose only and that is to protect the banking industry while at the same time placating the public in believing that they are acting in the interest of the American public.  Hogwash!   The Fed is here to run interference for the crooks running these banks and the malice mistakes that they make without regard for the results dumped upon the American public.  The Fed is a sophisticated organized crime unit that has no interest in the wellbeing of the US Citizen.  Lastly I am waiting patiently for the house of cards, so craftily built, by the crooks in our Federal Reserve System and the accompanying idiots of our government, to fall so I can once again begin to prosper.

 

 

Wed, 05/29/2013 - 22:56 | Link to Comment Prairie Dog
Prairie Dog's picture

"This Fed and the US government kept a thieving industry alive. For what?"

Because the alternative was utter financial and economic collapse. A capitalist economy cannot work without a functioning banking system. There's a lot of fashionable cynicism on Zerohedge. Most of it is muddle-headed idiocy. Life's unfair, get used to it. The Fed did what they had to do to stave off total collapse. No doubt they made a lot of mistakes and many people were unjustly enriched. But they did stave off collapse, and the economy is slowly healing. You don't know when you're well off.

 

Wed, 05/29/2013 - 23:10 | Link to Comment Joke Heros
Joke Heros's picture

"total collapse" eh?

You bought their fear mongering, many here didn't. The only total collapse avoided was the mass jailings and heads rolling in the streets of the bankster class who caused the crisis in the first place.

Instead, we get your bliss which is these same idiots not only not going to jail, but restarting the bubble idiocy and cashing in on the giant crutch of the Federal Reserve's free money policy for the past 5 years.

 

Wed, 05/29/2013 - 23:22 | Link to Comment Prairie Dog
Prairie Dog's picture

Just what I see. Mate, I don't care. I'm not American and I don't live there. The US is still one of the richest, most innovative and succesful economies in the world. The folks on Zerohedge talk like it's a tinpot Latin American dictatorship. Look around you, look at what you have. You are blind in your cynicism. Does the US have problems? Of course. Which country doesn't? But you want to tell me the entire socio-economic structure is one giant ponzi scheme run by thieves? Don't make me laugh! Go to Latin America, go to Asia, go to Russia. There you will see countries that really are run by thieves. You don't know how lucky you are.

 

Wed, 05/29/2013 - 23:31 | Link to Comment snr-moment
snr-moment's picture

That's right.  No way, No how, is this ship ever gonna sink.

Thu, 05/30/2013 - 00:50 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

Sir ... to a large degree you are correct ... most of Amerika is relatively 'honest' and less corrupt comparatively on a global level --- see Argentina, Venezuela, etc.  But there are exceptions ... and this being the USofA, they are whoppers.   Take Chicago ... where the 'political coalition' essentially has taken over the entire state government to support the 'voting coalition' of Chicagoland ... with the media on the take (or maybe more accurate - mortally terrrified to 'report' reality there)  and the dumb suburbans manipulated into fiscal insanity there.   Yes, the suburban votes, which always used to the bulwark protecting Downstate Illinois from the cesspool of Chcago coalition politics gave up the ghost for completely inane reasons as they believe what the Chicago Tribune et al non-report (remember, one David Axelrod came from the august Tribune ..... a true 'jornolist') 

Thu, 05/30/2013 - 00:08 | Link to Comment charliehbryan
charliehbryan's picture

I recced your comment but I think there is an option you fail to consider: nationalization of the banks and expropriation of their assets. Because, when all is said and done, 'bailing out the banks' meant in practical terms rescuing the banks' share-holders and bond-holders of the TBTF banks. There is no sacred law writ anywhere that says banks have to be privately held institutions. Instead, after nationalization, one could think of banks as 'public utilities,' much like your water and power.

Overall, though, I agree with your main point: if you are going to have a mercantile-capitalist system, banks are absolutely necessary to provide liquidity. Now whether those banks need to be privately owned . . .

Wed, 05/29/2013 - 21:01 | Link to Comment Nimby
Nimby's picture

I didn't believe it at first, but then my best friends cousin tried it and started making crazy money from home?  How did she do it?  You wouldn't believe me if I told you, because it is so easy!

You can buy and sell tulip bulbs on-line and make over $10,000.00 a week!  There's no downside because you never actually have the bulbs!  

Learn how to make quit-your-job money! http://www.greaterfool.com

 

Wed, 05/29/2013 - 21:20 | Link to Comment Prairie Dog
Prairie Dog's picture

US housing is still cheap by historical measures and relative to average earnings. This recovery could continue for years

Wed, 05/29/2013 - 23:27 | Link to Comment snr-moment
snr-moment's picture

Unless, of course the Baby Boomers grow older.  And their kids have to pay a 60 percent (all inclusive) tax rate.  And the government reinstitutes the estate tax.  And wages stagnate while inflation wipes out the middle class.

 

Yeah, housing is WAY undervalued.

Wed, 05/29/2013 - 21:20 | Link to Comment noless
noless's picture

How is this not fraud?

Wed, 05/29/2013 - 22:02 | Link to Comment robertocarlos
robertocarlos's picture

The average Canuck homeowner is spending 15k this year on home improvements. I prefer spending 12k on rent. I'm sure the homeowner is happier than me as I live with crappy 25 year old crap. Shit never breaks down but it's loud and ugly.

I forgot to mention the average homeowners house went up 20k in price YoY. My rent went up 4%.

Wed, 05/29/2013 - 22:03 | Link to Comment Zer0head
Zer0head's picture

"We would urge everyone to just stay away from this idiocy, same as the centrally-planned, manipulated, broken stock market."

 

good advice, very good advice

 

what's that little voice whispering..666 s&p

is that you Rosie

 

Thu, 05/30/2013 - 08:05 | Link to Comment Aegelis
Aegelis's picture

"Housing Recovery" is just like the weather.  If you want to see what's happening, look outside.  I see my neighbor's house still up after two months and the one across the street for sale over a year.  From the clouds, it also looks like it's going to rain, so I don't need bow-tie weatherguy to tell me there's a 50% chance.

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