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Big takeaways from our survey of fix-and-flippers last week: 1) Rates have massively slowed transactions and prices are falling broadly. 2) Lots of talk about flippers changing strategies, holding-and-renting instead of flipping, or exiting the space entirely.
COMMENTARY 🧵->
COMMENTARY 🧵->
#Atlanta flipper: “Many highly-leveraged flippers will need to go out of pocket to sell or will default on no-recourse loans. We will not see improvement until the 2nd half of 2024. Many will not make it to that point and there will be some bargains for cash-flush investors.”
#Baltimore flipper: “Sellers are still not reacting to market shifts. Sellers need to lower prices.”
#Boston flipper: “It’s tough to say how far prices will drop and it’s tough to buy projects based on future values.”
#Boulder flipper: “Higher rates are making things difficult, but also reducing competition. Things seem uncertain and the market has cooled considerably because of these rate hikes.”
#Charleston flipper: “The sales market is definitely heading downward, with some areas seeing price declines on a monthly basis. This trend now needs to be priced-in to new buys.”
#Dallas flipper: “Buyers have dropped out of the market, so we have paused buying and selling.”
#FortWayne flipper: “Millennials are our largest buyer segment and are too young to remember anything but 2-3% mortgage rates. Higher rates scare them. Low inventory may help, but I see a major downturn coming with large adjustments in home values.”
#FortWorth flipper: “Buying investment properties in this market is very difficult right now. Most sellers still want too much money and there is not much available for sale.”
#Fresno flipper: “Interest rates have pushed prices out of affordable ranges. Flippers need lower prices to ensure profit margins remain decent.”
#HiltonHead flipper: “Flips with an acceptable ROI on paper have been difficult to find. In the past year, rising prices have made marginal flips work. As prices have stagnated, the market has become too risky. I am waiting for some stability before picking up new projects.”
#LasVegas flipper: “This market is way overpriced still and wholesale prices are way exaggerated. The cost to rehab has increased and contractors that are credible are difficult to find. Jobs don't get completed in time or on-budget most of the time.”
#LasVegas flipper: “Very difficult to find deals in a downward-trending market. Sellers and wholesalers are asking too much. A wise flipper will sit out for a while. The retail buyers are sitting out until interest rates come back down.”
#LosAngeles flipper: “The market has slowed tremendously. Traffic is way down, we are seeing fewer offers, and every buyer is writing lowball offers.”
#Memphis flipper: “Up until 3 months ago, I would receive offers from investors paying cash. Now, I seem to almost always receive offers from investors getting package loans and putting 20% down, which of course is nowhere near as desirable as a quick cash closing.”
#Nashville flipper: “Sales are slowing every month and prices are under pressure. We expect this to continue and maybe get worse.”
#Orlando flipper: “We are now focusing on buying and holding in high-demand areas.”
#Phoenix flipper: “Prices are declining and inventory is soaring. We're looking to buy, rehab, and rent instead of flipping.”
#Richmond flipper: “It isn't worth flipping right now unless you buy at a steep discount to offset declining values. Will look to re-enter the market in 2023 after pricing has hopefully stabilized and more inventory is available for purchase at better prices.”
#RiversideSanBernadino flipper: “We are selling homes at prices about -5% to -10% lower than we would have in the spring of this year.”
#Sacramento flipper: “It's time to buy and hold. Sellers in this market are in a need-to-sell situation.”
#SanAntonio flipper: “The cost of borrowing, holding, and financing long-term rentals has tightened a lot, so after-repair value (ARV) has to be high for deals to make sense.”
#SanDiego flipper: “Homeowners are more willing to negotiate now and are discounting sale prices drastically to account for a market that is continuing to decline.”
#SanFrancisco flipper: “Home prices are dropping. Unless the flip is a slam dunk, we have to be cautious on the purchase.”
#Tacoma flipper: “We are waiting for things to stabilize and will proceed from there. Interest rates are not helping.”
#Tampa flipper: “The pressure is to the downside and sold comp data is becoming less useful. Prices are declining up to -1% per month. Lenders and other wholesalers should do more work on analyzing recent data. Data from 6 months ago is dangerous for a house flipper.”
Many thanks to our partners at Flatiron Realty Capital and @SundaeHQ for their help with this survey.
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Adam B. Levine @adamblevine
·
Nov 4, 2022
Interesting thread on the extreme speculative side of the housing market. Rates have tripled this year, which means most buyers are priced out since they can’t borrow enough money to buy. Of course, flipping at scale was largely a distortion caused by the central bank. #oops