House Flipper Lending Hits 13-Year High: What Can Possibly Go Wrong?
The flippers are back and the competition fierce as there are fewer and fewer foreclosed properties to bid on. Haven't we been down this road before?
As the competition heats up, Lending to House Flippers Hits a 13-Year High.
- It is getting much harder to profit on house flipping today. Home prices are high, there are very few distressed or foreclosed properties available to buy cheaply, and the competition among investors is fierce.
- The good news is, mortgage rates are historically low for bank lending, and private lenders are eager to invest their cash somewhere other than the volatile stock and bond markets.
- The dollar volume of financed flip purchases in the second quarter of this year jumped 31% annually, from $6.4 billion to $8.4 billion, according to ATTOM Data Solutions.That is the highest level since the third quarter of 2006.
Smart to Use Leverage!?
Vipin Motwani an investor with Iron Gate Development in the Washington, D.C. area expects to flip about 15 homes this year.
“It’s always smarter to use a mortgage because you get leverage, you can do many more deals, right?” said Motwani. “Also the banks have become a little bit more easy in lending on this flip business. It used to be a lot tougher.”
Housing Bubble Reblown
The Fed has re-blown the housing bubble.
Yet, it's "always smarter to use leverage to get more deals."
What can possibly go wrong?
Mike "Mish" Shedlock