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Thursday, 2 Jun 2016 | 9:26 AM ET

It looks so easy on TV. Buy a bargain-basement house, pull up some nasty carpet, re-tile the bathroom, paint away the wall stains and sell it for a hefty profit.

It’s not, however, all those popular shows that are driving the flipping market today. It’s pure and simple prices — and profit. There is a severe lack of good quality, turn-key homes for sale, and that has created a seller’s market across the nation, even for those reselling homes.

After cooling off in 2014, home flipping is on the rise again — its share of all home sales is up 20 percent in the first three months of this year from the previous quarter and up 3 percent from the same period a year ago, according to a new report from RealtyTrac, which defines a flip as a property bought and resold within a 12-month period.

While flipping today is nothing like it was during the housing boom a decade ago, when investors used risky mortgages, it is reaching new peaks in 7 percent of the nation’s metro markets, including Baltimore, Buffalo, New Orleans, San Diego and even pricey Seattle.

Dana Rice, real estate agent and home flipper, at her latest project in Bethesda, Maryland, a very small colonial, within walking distance to shops and Metro.

Diana Olick | CNBC
Dana Rice, real estate agent and home flipper, at her latest project in Bethesda, Maryland, a very small colonial, within walking distance to shops and Metro.

“While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets,” said Daren Blomquist, senior vice president at RealtyTrac.

That’s because flippers today largely use cash — 71 percent did in the first quarter of this year. Compare that to just 27 percent who used cash at the height of the housing boom. That helps keep most flippers conservative, but it also exacerbates the problems for entry-level homebuyers, who are facing one of the tightest housing markets in history. They simply can’t compete against all-cash buyers.

Usually flippers look for distressed properties either in the foreclosure process or already bank-owned. These are not always listed on public sale sites. There are fewer of those today, so flippers are moving to the mainstream market, creating that new pressure.

“A telltale sign is when flippers are acquiring properties at or close to full market value. Those markets are so competitive that even the off-market properties flippers are looking to buy are not selling at much of a discount — and there may be very few distressed properties available,” said Blomquist.

Examples of these markets include San Antonio, where Blomquist says flippers are actually purchasing at a 7.8 percent premium above estimated full market value, as well as Austin, Texas; Salt Lake City; Naples, Florida; Dallas and San Jose, California.

Despite the premium to buy, flippers are still seeing growing gains in profit. Home flippers realized an average gross profit of more than $58,000 in the first quarter of this year, the highest since the third quarter of 2005, according to RealtyTrac.

Real estate agent Dana Rice and her husband flip houses in the tony D.C. suburb of Bethesda, Maryland. Prices there are well above the national median, and there are few distressed properties. Instead, they target old, small fixer-uppers. Even those command a hefty purchase price up front, but they can also offer big rewards.

“I didn’t want a teardown. There is so much character in this part of Bethesda,” said Rice. “I don’t think that everybody wants a brand new build. There is a hole in the market because not everyone wants to do a renovation. If you put a little bit of effort in, these numbers can be huge.”

Rice purchased her latest project, a very small colonial, within walking distance to shops and Metro, for $680,000. She expects to put half a million dollars into the renovation, adding both square footage and high-end finishings; she is confident that in this competitive market she will see an 18-25 percent return on investment.

“It’s like birthing a baby. … If you’re overpriced, you’re dead in the water.” -Dana Rice, real estate agent and home flipper

“It’s like birthing a baby,” she said, noting that she will wait to list it until she feels the market is just right. “If you’re overpriced, you’re dead in the water.”

The lack of inventory is certainly a double-edged sword for flippers. Their initial investment price can be high, and flippers are often competing against local builders, who may want to tear the house down and put something up that is twice the size. On the other hand, not everyone wants or can afford a huge, new, expensive home, and that gives flippers the edge.

“The key here is that there is particularly a dearth of listed inventory in good condition,” said Blomquist. “That is the inventory flippers are competing against when they sell.”

California’s Homeowner Bill of Rights went into effect in 2013 and stopped mortgage servicers from engaging in abusive practices that were leading to unnecessary foreclosures on families throughout California.

However, some homeowners, mostly senior, recently widowed women, are finding that banks and servicers refuse to extend the consumer protections included in HBOR to them.  Instead, these homeowners are getting caught in a bureaucratic trap.

“Surviving homeowners” are homeowners or other heirs who are not listed on a mortgage, but who have an ownership interest in a home. In the most common scenario, a husband was the only person listed on the mortgage. After he passes away, his widow tries to contact their mortgage company to find out information about their monthly payment and if she can remain in the house by assuming the loan.  She may also inquire about the possibility of modifying the loan if the household income was just cut in half with the loss of her spouse.

Instead of getting help, many survivors are facing bureaucratic runarounds, mixed messages, and long delays. In one particularly egregious case near Los Angles, the servicer “forgot” to tell a widow that her deceased husband had purchased insurance to pay off the home if he passed away.

Absent a careful review by a paralegal who caught the bank’s error, and media attention from McClatchy, the servicer had planned to foreclose on her ten days before Christmas.

Attorneys at Housing and Economic Rights Advocates, a nonprofit law firm, have worked with over 50 of these surviving homeowners from across the state in the past several years.  After hearing from advocates like HERA, federal regulators provided guidance to servicers on how to help these surviving homeowners.

But according to California housing counselors and attorneys who have completed multiple surveys, mortgage servicers aren’t aware of the guidance or don’t see the need to follow it. As a result, a widow, widower, or heir without an attorney will face an uphill battle in attempting to keep their home.

Stories from surviving homeowners would make the worst bureaucrat blush. Some have been instructed to have their deceased loved one sign a Power of Attorney before the servicer will talk to them. Others have wasted months and even years being referred between multiple departments and receiving conflicting information. Meanwhile, the foreclosure process moves forward, creating more stress during an already difficult time.

SB 1150, the Homeowner Survivor Bill of Rights, co-authored by Sens. Mark Leno, D-Calif., and Cathleen Galgiani, D-Calif., would put a stop to these servicer abuses. After a servicer is contacted by a surviving homeowner or other successor in interest, they would need to take reasonable steps to speak with that person before moving forward on the foreclosure process.

These reasonable steps include providing a single point of contact, informing the surviving homeowner of their options for assuming the loan, and, if necessary, options for modifying the loan.

The banking industry is opposing SB 1150, in part because it includes a private right of action. This ability for homeowners to sue for violations was also included in the Homeowner Bill of Rights, a bill the industry also opposed, predicting economic ruin if it passed.

Instead, HBOR serves as an incentive for servicers to clean up their practices, to train their front-line staff, and to stop engaging in some of the worst abuses, or to face legal action.

The common-sense protections included in SB 1150 are supported by Attorney General Kamala Harris, and over 50 well-known California nonprofits such as AARP California, the Courage Campaign, and Consumers Union.

Senate Bill 1150 is expected to be voted on next Monday by the California Assembly Committee on Banking and Finance.  With California’s senior population growing by 1,000 people every day, SB 1150 is an opportunity for California to lead the nation again in protecting these senior homeowners.

Home Flipping Rate Still 26 Percent Below Q1 2006 Peak;
Average Gross Flipping Profit at a More Than 10-Year High;

IRVINE, Calif. – June 2, 2016 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its Q1 2016 U.S. Home Flipping Report, which shows that 6.6 percent (43,740) of all single family home and condo sales in the first quarter of 2016 were flips, a 20 percent increase from the previous quarter and up 3 percent from a year ago to the highest rate of home flips since the first quarter of 2014.

For the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by RealtyTrac in more than 950 counties accounting for more than 80 percent of the U.S. population (see full methodology below).

The 6.6 percent share of total home sales that were flips in Q1 2016 was still 26 percent below the 9.0 percent share at the peak of home flipping in Q1 2006, but was 55 percent above the recent trough in home flipping — 4.3 percent of total home sales in Q3 2014.

“After faltering in late 2014, home flipping has been gaining steam for the last year and a half thanks to falling interest rates and a dearth of housing inventory for flippers to compete against,” said Daren Blomquist, senior vice president at RealtyTrac. “While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets.

“The good news is that — despite the 20 percent jump in the first quarter — home flipping nationally is not far above its historic norm, and home flippers in most markets appear to be behaving rationally and responsibly,” Blomquist continued. “In the first quarter, 71 percent homes flipped were purchased by the home flipper with cash — compared to only 37 percent who purchased with cash at the height of the flipping boom. Spending their own money rather than other people’s money is keeping flippers conservative. On average they are buying the homes they flip at a 27 percent discount below full market value and selling them at a 6 percent premium above full market value, helping to deliver strong flipping returns on average.”

Home flipping hits new all-time highs in 7 percent of markets

Counter to the national trend, the share of home flipping reached new all-time highs in Q1 2016 in nine of 126 metropolitan statistical analyzed (7 percent) including Baltimore, Maryland; Buffalo, New York; Huntsville, Alabama; New Orleans, Louisiana; and York-Hanover, Pennsylvania.

Other markets where the share of home flipping has reached new highs since home prices bottomed out in 2012 include Seattle, Washington; Virginia Beach, Virginia; Bakersfield, California; and San Diego, California.

“It’s somewhat surprising to see flipping is on the rise in the Seattle area given our rapidly rising home prices,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where the share of homes flipped in Q1 2016 increased 32 percent from the previous quarter and were up 5 percent from a year ago. “My hope is that this is a temporary byproduct of having far more buyers than available inventory, as an increase in home flipping numbers can artificially inflate prices and makes homes even less affordable for buyers. Thankfully we are starting to see modest increases in the number of homes for sale in Seattle, which should cause a slowdown in price growth as we head into 2017.”

Flipping share up from a year ago in 60 percent of local markets

Home flipping as a share of total sales increased from a year ago in 75 out of 126 metropolitan statistical areas analyzed for the report (60 percent). Among markets with a population of at least 1 million, those with the biggest increases in the rate of flipping were New Orleans (up 45 percent), San Antonio (up 34 percent), Nashville (up 26 percent), Cleveland (up 26 percent), Columbus, Ohio (up 23 percent), and Dallas (up 22 percent).

“As available listing inventory has remained low across Ohio, rising residential home prices and strong buyer demand are fueling a resurgence of small investors entering the market to rehab and flip residential homes,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus housing markets, all of which posted a year-over-year increase in home flipping rate. “While in recent years, large institutional investors had been leading the way in purchase of mortgage notes and foreclosed residential shadow inventory, restored market prices appear to be lessening the appetite of such Wall Street investors.”

Markets with the highest share of flipping in the first quarter were Memphis, Tennessee (13.3 percent); Clarksville, Tennessee (12.5 percent); Deltona-Daytona Beach-Ormond Beach, Florida (11.8 percent); Fresno, California (11.3 percent); and Visalia-Porterville, California (11.1 percent).

Other markets where the share of homes flipped surpassed the national average included Tampa, Florida (10.8 percent); Las Vegas (10.3 percent); Virginia Beach (9.9 percent); Miami (9.5 percent); and Jacksonville, Florida (9.4 percent).

“There continues to be good opportunities for cash investors in the South Florida market,” said Mike Pappas, CEO and president at the Keyes Company, covering the South Florida market. “One out of 10 transactions in the first quarter were flipped investor deals yielding an average $65,000 gross profit with an average 51 percent gross ROI.”

Gross flipping profit increases to more than 10-year high

Homes flipped in Q1 2016 yielded an average gross profit of $58,250, the highest average gross flipping profit since Q4 2005 — a more than 10-year high. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of the property’s after repair value).

The average $58,250 gross flipping profit in Q1 2016 represented an average 47.8 percent return on the original purchase price, the highest average gross flipping ROI since Q3 2012.

Markets with highest average flipping ROI

Markets with the highest average gross flipping ROI in Q1 2016 were East Stroudsburg, Pennsylvania (212.1 percent); Reading, Pennsylvania (136.4 percent); Pittsburgh, Pennsylvania (126.8 percent); Flint, Michigan (105.8 percent); and New Haven, Connecticut (104.8 percent).

Other markets with an average gross ROI above 80 percent included Philadelphia (103.7 percent); New Orleans (97.6 percent); Cincinnati (88.5 percent); Buffalo, New York (85.1 percent); Cleveland, Ohio (83.8 percent); Jacksonville, Florida (81.8 percent); and Baltimore, Maryland (80.8 percent).


Report methodology
RealtyTrac analyzed sales deed data and automated valuation data for this report. A single family  home or condo flip was any transaction that occurred in the quarter where a previous sale on the same property had occurred within the last 12 months. Average gross profit was calculated by subtracting the average price for the first sale (purchase) from the average price of the second sale (flip). Average gross return on investment was calculated by dividing the average gross profit by the first sale (purchase) price.

Data Licensing and Custom Report Order
Investors, businesses and government institutions can contact RealtyTrac to purchase the full dataset behind the Year-End and Q4 2015 U.S. Home Flipping report, including data at the state, metro, county and zip code level. The data is also available via bulk license or in customized reports. For more information contact our Data Solutions Department at 800.462.5193 or datasales@realtytrac.com.

About RealtyTrac
RealtyTrac is a leading provider of comprehensive U.S. housing and property data, including nationwide parcel-level records for more than 130 million U.S. properties. Detailed data attributes include property characteristics, tax assessor data, sales and mortgage deed records, distressed data, including default, foreclosure and auctions status, and Automated Valuation Models (AVMs). Sourced from RealtyTrac subsidiary Homefacts.com, the company’s proprietary national neighborhood-level database includes more than 50 key local and neighborhood level dynamics for residential properties, providing unrivaled pre-diligence capabilities and a parcel risk database for portfolio analysis. RealtyTrac’s data is widely viewed as the industry standard and, as such, is relied upon by real estate professionals and service providers, marketers and financial institutions, as well as the Federal Reserve, U.S. Treasury Department, HUD, state housing and banking departments, investment funds and tens of millions of consumers.

Media Contact:
Jennifer von Pohlmann
949.502.8300, ext. 139
jennifer.vonpohlmann@realtytrac.com

Data and Report Licensing:
800.462.5193
datasales@realtytrac.com

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Nothing can kill a sale faster than a dated, closed-in kitchen area. Many of today’s buyers see the kitchen as the home’s command center, and not just a place for cooking and eating. They want the kitchen to be many things at once, hence the rise in popularity of what is known as the multifunctional open-concept kitchen.

Read more: 9 Modest Fixes for the Problem Kitchen

If your clients are looking to renovate an existing kitchen, or you need to advise them on building one that’s brand-new, the Washington Post shared some background on how they can design a kitchen space so that it’s functional in many different way.

“Whether you are renovating existing structure or building new, architects fully recognize the need for space that is designed for movement and flow,” says Stephanie Brick, senior designer at Sustainable Design Group, in Gaithersburg, Md. “There are still rules and important elemental guidelines — you do not want to just delete all of the walls on your first floor. But by being selective in the design, materials and professionals you work with, you can easily achieve a space that does not merely react to, but anticipates, your bustling lifestyle.”

The two main considerations when designing a multifunctional space are wall placement and storage. While it may seem like an easy solution to knock down walls, Brick says there are other architectural solutions, like open doorways, that can give a similar effect while keeping the space architecturally interesting.

Being as honest as possible about individual organizational and storage needs is key when creating a multifunctional kitchen. For some owners who want to use the kitchen as a makeshift homework area or as a place to handle their bills, adding storage for these needs will be necessary. If your clients do a lot of cooking and entertaining for large groups, they will want to make sure the kitchen has space and storage to accommodate that process. If the family has small children, the kitchen can be designed with their safety in mind.

Brick has one final piece of advice when designing this type of kitchen space. “Honesty with your architect is key to creating a strong working relationship and delivering an equally beautiful and functional space in your home.”

Source: “How to create a live/work/play space at home,” The Washington Post (June 8, 2016)

via Now Trending: The Multifunctional Kitchen | Realtor Magazine

Mortgage rates may be hovering near record lows, but it’s not enough to counter the sky-high, and still rising, prices in many of the nation’s largest housing markets.

Big-city rents have been soaring, but now the outlying areas where residents flee to find affordability are seeing even bigger rent gains, too. For homebuyers, the picture is not much better. A very tight supply of homes for sale is pushing home values higher and pricing potential buyers out, both first-time and move-up buyers.

Big cities have always been expensive, but in a troubling new twist — suburban areas are becoming unaffordable faster than their urban neighbors, according to a new report by Trulia. Brooklyn, New York, is actually seeing a bigger drop in affordable rental listings than Manhattan. The same is true in Oakland, California, compared to San Francisco and Scottsdale, Arizona, compared to Phoenix. Portland, Oregon, and Seattle have seen a big influx of residents fleeing pricey Northern California and are now becoming more unaffordable than the San Francisco Bay area.

via Buying or renting, housing affordability just gets worse