The number of people flipping houses is now at historical highs, those not seen since before the recession. In 2004-2005 the number of “House Flippers” was off the charts hitting an all time high of close to 80,000/quarter. Immediately following these record high numbers the market took a huge drop and reached an all time low for house flipping, recorded at less than 20,000/quarter.
Factors Working in Favor for House Flippers:
- Increase in house pricing across the country
- Not a lot of housing inventory, which is creating a lot of competition
- Huge Demand among home buyers
Average Profit Being Made
Profits have been rising like crazy after the financial crisis in 2009.
Previous “average” profit made after crisis in 2009-might make around $19,000.
Current, 2016, profit ringing in around $60,000!
Big banks, like JP Morgan & Goldman Saacs, used to be able to fund the house flipping projects directly. However, after the financial crisis & new regulations being put in place, they are not able to fund directly anymore. So now banks are being forced to make loans to the lenders, who will then fund the house flipping projects on an individual basis of approval.
Silicone Valley is now getting involved and making loans directly to the house flippers, similar to what big banks did prior to the financial crisis. Essentially there are 3 players in the House Flipping Funding market; Housing Lenders, Silicone Valley & Private Money Lenders!
So what can we expect for this industry?
-There is Concern that there could potentially be another Housing Bubble due to the possibility of the market being over saturated.
-Additionally, interestingly enough- historically foreclosure rates are lower on house-flipping loans, however this is not the case for 2016. These 2 factors are definitely influencers for both Housing Lenders & Silicone Valley, which are being taken into consideration when evaluating House Flipping projects; potentially making it tougher for House Flippers to receive a quick & successful approval & subsequent funding for their projects….
Hard Money Lenders are able to approve various House Flipping loans when other lenders can’t!
(Original Article Citations: WSJ.com; Kristen Grind, Peter Rudegeair)