Americans Are Flipping Houses Like It's 2006 All Over Again

Tyler Durden's picture

How quickly the sins of the past are forgotten.

Roughly 10 years ago, a Mexican immigrant working as a strawberry picker in Bakersfield, California, making $14,000 per year, was lent every single penny he needed to purchase a $720,000 home.  And, as crazy as that sounds to most of us, stories such as that were all too common leading up to the 2008 housing crash as everyone, and their brothers, became expert real estate investors buying and flipping multiple houses every month...which worked really well, until it didn't.

Now, and quite unfortunately for those of us that prefer not to day trade our primary residence, America's home flippers are making a come back.  According to a new study from Trulia, home flips accounted for 6.1% of all U.S. home sales in 2016, which is the highest share since 2006, when flips accounted for 7.3% of sales.

House Flipping

 

As Bloomberg points out, the cities where home flipping seems to be the most pervasive are all the same ones that suffered the biggest boom/bust during the last cycle.  Perhaps we could suggest that the people of Las Vegas need to just do all their gambling INSIDE the casinos from now on.

House Flipping Volume

 

Of course, rising home prices are responsible for luring Americans back into the home flipping game...because everyone gets to look like a genius real estate investor in a rising market.

Flipping has become more common as home prices have increased, said Ralph McLaughlin, chief economist at Trulia. Whether that’s cause for concern is an open question.

 

Local housing market investors can bid up prices in a speculative frenzy, as recent history has shown. When flippers crowd into a market, meanwhile, they compete with buyers seeking a home to live in, deferring the availability of listings and pushing homes out of some buyers’ price range.

 

But flippers can also provide a valuable service to the housing market by investing in needed improvements that owner-occupiers might not have time for, McLaughlin said. Trulia’s report shows that flippers in Las Vegas are seeking building permits at the highest rate since 2000, suggesting that they’re making substantial repairs and not simply buying homes to ride local price appreciation.

 

"Is the market going to flip out again?" he said. "I don't think the signs are there yet."

But maybe it will all work out this time around.  After all, as a Bear Stearns RMBS trader told us back in 2007, "these structures will never break because home prices have never fallen more than a few percent in the history of the United States"...well, except that one time that they did.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
BabaLooey's picture

...and the gold buyers are back too....

I see the WE BUY GOLD signs up again. Human sign spinners are out again.

I'm getting spam as to flipping houses again....

Sure does have a 2006 tinge to it....

Peak Finance's picture

Shit, you noticed that too? I thought it was just one or two crazy companies down in Broward.

Why are they back? Weak hands sold long ago? I don't get it, who would sell real gold at this price? 

silverer's picture

People want to buy it because they expect it to go up. And up it will go.

enfield0916's picture

The world is upside down, day is night, right is wrong, Libturds are tolerant, Cucksurvatives are patriotic, stock market reflects REAL health of the economy and houses are undervalued.

If you're using the above stated logic, then yes the prices will go UP! Good for people like me who know the difference between a ponzi scheme and real money. Happy stock hunting, enjoy while it lasts.

BabaLooey's picture

Companies are trolling for MOAR weak hands, to buy those weak hands gold, before it spikes again.

Gold is "down" right now - and lots of people are still broke. Lots of people STILL have "junk" gold (jewelry, etc.), and are cash poor.

Lather, rinse and repeat (the fleecing).

Flippers are using the rising interest rate "threats" as a selling point.

It's total insanity. One client I advise bought a home 18 months ago. They have done some improvements - but nothing drastic.

I visited them over the holidays. He remarked "we just had it appraised, and it's gone up over 100k since we bought it."

(Cocoa Beach...a canal/ocean access home, but a shoebox).

Insanity.

Kassandra's picture

I'm thinking the next big thing in the U.S. will be 50 year mortgages...

Raffie's picture

Flipping houses is great, but now days will be like a game of hot potato.

When things go boom, best be sure you don't have that hot potato in you hand or you will get burned.

BabaLooey's picture

It smells just like..............late 2006......earrrrrrrrrrrrrrly 2007-ish.

38BWD22's picture

 

 

We're selling our larger ocean-front condo and moving to a smaller (cheaper but new) one inland.

Cashin' out, bitchez.

Not selling any gold.

* * *

Hear ya Raffie, BabaLooey and Peak Finance......

 

Raffie's picture

Family and people tell me I should be buying anf flipping houses.

I tell them AFTER I will.

They are like AFTER?

Ya, after the crash hits.

I might buy a street or 2 of houses.

TheRideNeverEnds's picture

This time is different.

House prices are only going up 20-50% per year in vegas. Get in now before you are priced out forever!

yogibear's picture

Yes, fipping homes big.  HGTV is promoting it.

Lots of fluff, getting fluffier.

ghengis86's picture

Last time around, those shows ran a couple years before SHTF. By my calculations, we are at or even PAST the same point in the cycle. I was expecting a similar dump but it hasn't occurred yet. I sold all my RE properties (rentals) last year at a modest profit. I'm still convinced being early is better than being late, but I still can't help but thinking I'm missing the blow off top run up. Oh well. I drink good whiskey, have good sex with the wife and am content with my lot in life. Can't complain too much!

Pedro's picture

I would think that rentals would be good to have through a turbulent real estate bubble burst.  I am not questioning your logic, but, I am interested in your reasoning.  Mainly because I am a small investor with 3 rentals.

Arnold's picture

The only real problem with rentals is tenant cash flow.

Despite vetting, they often don't have any.

WakeUpPeeeeeople's picture

Rentals can be good if owned free and clear but you might want to save a bullet or two for the taxman.

Mike Ochisbent's picture

Winning! Not whining. Good on you.

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) ghengis86 Jan 26, 2017 2:16 AM

If you actually had calculations, they would be quite valuable.

pliny the longer's picture

what whiskey u prefer?  

speaking of bubbles, wtf happened to bourbon, now every hipster dipshit thinks he's an expert on bourbon.  we even have 'craft bourbon distilleries' complete with fireplaces and free range cats popping up in my town.  the only problem is its not bourbon!!  its 2 yr old sea swill they sell for $17 per cocktail!!!  and its disgusting!!!  yet here all the millenials sit and sip and act sophisticated, its like the emperor has no clothes.  

for same $$$ u can get a bottle buffalo trace, stay home and surf 0H.  for a bit more, you can get some stag and see what livin is like.  talk about bubbles, can't wait for it to pop so all the jerk offs can get back to their video games. 

sixsigma cygnusatratus's picture

Dow 20k, check.  House sales like it's 2006, check. College tuition +$100k, check.  M2 highest in history, M2 velocity nose diving. Nothng to see here, keep printing, Yellen...

RSDallas's picture

The smart, long term investor exited the market 12 to 18 months ago. There is no real money to be made here, only risky, short term, speculative money. These rookies are making less than pennies on their projects right now and if interest rates were normalized they would be loosing money. The Federal Reserve should be shut down for allowing the values to reach the levels they are!

silverer's picture

But...but... I saw it on TV. lol

readyforit's picture

Gold plated houses for all!

Stalefarts's picture

Don't call it a house or a home, call it a building. 

Pigeon's picture

Remember, when the housing, auto and student loan and stock bubbles burst, it's all Trump's and his wacko-followers' faults. /s

$14 Trillion in debt/ Fed balance sheet and the most egregiously corrupt administration & crony capitalism in the history of the world had nothing to do with it.

Sh3epdog's picture

That's the sad thing. Many dislike Trump. When things blow up he's going to get all the blame even if he takes the right actions. People will not understand the underlying causes likely and it will be repeated a bit differently at some future date after the next crash. Everybody will likely blame everybody else and it will likely repeat : (

It is in the interest of banks and governments to have homes and land priced as high as possible. This allows for higher property tax - (although the gov could also increase prop tax % at lower home prices) in addition to higher rates of interest and continual loans banks can earn from - and the higher liklihood of credit card debt on the side included. Seeing owning a home more of a liability than - the best investment you'll ever make as it's touted to the public, might be a better way of looking at it. 

We need mass produced mass custimization modular homes to destroy home values. Historically a house was worth about as much as the land it sat on, too much disconnect was generally a bad idea. 

BGO's picture

The big banks are no doubt THRILLED at the return of the flipping phenomenon. Imagine the bankers rubbing their hands together at the prospect of receiving truck loads of free cash from the Fed ala 2008. Maybe the bankers can extract a full $TRILLION$ from American tax payers this time!

Seasmoke's picture

You would never make it as a bankster. They are going for 3 Trillion this time.

BarkingCat's picture

They might discover that Trump is more old fashioned than the last 2 presidents.

ebworthen's picture

Bubble 2.0 indicator; the special bubble, the biggest yet, in everything.

Dow 20K, and U.S. Debt at nearly $20 Trillion; harmony.

Yen Cross's picture

Quit editing my comments Tyler!  I have a very proficient [legal team]

HRH Feant's picture
HRH Feant (not verified) Jan 26, 2017 12:22 AM

So happy that the places I am going to look at to move are not on that list! Whew!

Yen Cross's picture

O/T   Sovereigns and huge lenders are covering their "natural" F/X positions. You were warned

   .

Stan Smith's picture

The reason Las Vegas is such an easy target is its priced more comparably to the Midwest when compared to the West Coast.   I can tell you my guess is a HUGE percentage of the flips there are L.A. folks and/or Asians.    I know of at least 2 or 3 big national funds that fund flipping, mostly in Vegas.   

For folks who live in million dollar houses in L.A.,  buying a sweet condo or house in Vegas seems like nothing.    Of course, it'll be worth nothing when everyone has to sell at the same time.  But is there a city more prepared for the boom and bust cycle that is Vegas?    It should be.   It's the ultimate boom/bust town.

I'll mention as well, that I can assure, while the CEO's of "Big Banks" might like the federal funds coming in,  most the operations folks do NOT want to get stuck with hundreds if not thousands of homes again.     The burden for banks -- costs associated with them -- in holding foreclosed on properties is pretty steep.    Unfortunately, the tax code is written as such that often taking a house to foreclosure can give them a loss that they wouldnt take on Short Sale... even though the short sale actually probably costs them less in costs and fees.

alpha-protagonist's picture

Anyone who has made $$$ over the last decade NEEDS to send a thank you note to Bush and Obama. Their fiscal gratuities have enriched the wealthy, padded the bottom line for banks and RE employees, and totally fucked renters and first-time buyers. Unless Trump changes this paradigm, then crime sure as fuck DOES pay!

peterk's picture

you yanks are dealing with  small chees in the US.. come to SYDNEY AUSTRALIA and see backyard sheds selling for  $1mill

Australians will rather NOT EAT than NOT have a vested interest in property

 

ONLY the BOND market can kill this  30year run on property imo,  they KEY is the cheapest spource of funds

and that is JAPAN..  ONCE the JAPANESE bond market falls like it did last yeat then its all over

OR

If some one can SHOOT  KURODA/ABE, then maybe it will  come faster.

Bunga Bunga's picture

Substantial repair would be tearing down those shacks and build real houses. Just new paint and granite countertops on rotten wood is a waste and not very productive.

Kasperfx's picture

 you know this is the end the "greatest fools" are in the game.

Silver Savior's picture

I hate house flipping. It's like buyer 1 buys it cheap, fills it with cheap shit then rips off buyer 2. Buyer 2 is the poor son of a bitch who has to live with it. Fuck real estate I hope we get the big crash and the sooner the better. The assholes are back doing the same dam thing leading to the black hole of 2008-09. 

They need to get stuck with a massive amount of properties they can't sell. The whole industry needs a hundred year depression. House flipping is the pollution of Satan! 

moorewasthebestbond's picture

NAR SEZ: All is well. Nothing to see here.

Wage Slave 927's picture

What's Linda Green doing these days?

Last of the Middle Class's picture

I'm sure a lot of that is from the massive buy in of repo'd houses hedge funds went into with their eyes closed. After all they were just bailed out for it instead of the money going to the consumer level. If you buy all your home repair/upograd at retail your margin can go negative VERY quickly.

AC_Doctor's picture

Japanese 10 year bond at .900%.  Looks like the JGB market is spinning like a vortex in a flushing toilet.