Posted on 05/02/2013 10:33:33 AM PDT by whitedog57
Realty Trac has an interesting study of the top 25 areas for house flipping. They are primarily dominated by sand states (Arizona, Nevada, California, Florida) and … Tennessee?
This comes at the same time that The Fed is keeping rates low and the ECB just announced a rate cut.
(Bloomberg) — The European Central Bank cut its key interest rate to a record low as the 17-nation euro region struggles to emerge from recession. Policy makers meeting in Bratislava today lowered the main refinancing rate to 0.5 percent from 0.75 percent.
The reaction? Global sovereign yields declined … even more. Only the US rose a little.
Between The Fed, the ECB and Bank of Japan continually lowering rates, mortgage rates (BankRate 30 and Freddie 30 year Commitment Rates) have fallen to record lows.
House price have risen over 2012 and thus far in 2013, but they remain relatively unchanged since 2009.
Bear in mind that housing inventories are below levels not seen since 2000, but are increasing.
So, we have a low inventory, low mortgage rate recovery. Also known as an investor-driven recovery. Mortgage applications are increasing since January 2012 (like home prices), but there are still a plethora of investors competing for the reduced inventory of homes.
If you ain’t got cash, you ain’t buying homes in the sand states. Banks want cash sales, so investors are running the market.
The higher a house is valued, the more property tax money busted local governments can collect.
House flipping runs up the market price, leading to an inevitable collapse.
And some of the flippers expect bailouts.
They are not necessarily flippers. If you can collect a return of 8% in rent on your investment, you are beating 95% of what’s out there.
Wait until they drive prices high enough for the builders to start dumping more houses into the market. We’ve seen this movie before. First it was government pushing uncollectable mortgages, now it’s loose monetary policy pushing investors into real estate that is still overpriced from the last bubble. Same culprit, different mechanism, same eventual outcome. Whee!
Federal Reserve to Maintain Stimulus at $ 85 Billion Plus a Month Forever
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