Investor Intel: Flippers Flying High, Rental Population Booming
The volatility markets experienced mid-2015 through the early part of February seems to have largely calmed down, employment has continued making strides, energy prices have bounced and the S&P 500 has jumped more than 7 percent.
Still, despite positive economic data, public sentiment is shaky, prompting the Fed to leave rates unchanged at their March meeting. Projections had called for four rate hikes in 2016, but now new estimates have called for only two.
While mortgage rates are rising, they’re still at record lows, adding fuel to what is expected to be a red-hot spring buying season for the housing market. Early indicators are in: Total mortgage application volume is soaring, according to the Mortgage Bankers Association, which found volume to be 20 percent higher year-over-year in the first week of March 2016.
All that demand is causing house prices to rise. According to CoreLogic, house prices (including distressed sales) increased 6.9 percent year-over-year in January 2016. Not surprisingly, appreciation slowed in the oil markets, with Houston-The Woodlands-Sugar Land, Texas logging a 5.7 percent year-over-year gain and Midland, Texas logging 4.3 percent. However, this may accelerate along with the price of oil.
Meanwhile, foreclosure inventory fell nearly 22 percent year-over-year in January 2016. Serious delinquency rates increased in two Texas metro areas from the prior year: Midland and Odessa.
While foreclosure inventory is down, flipping activity is rising and at its most profitable since 2005, according to RealtyTrac. The 5.5 percent share of U.S. housing flips in 2015 was up from a 5.3 percent share in 2014, marking the first annual increase in the share of houses flipped following four consecutive years of decreases. Houses flipped in 2015 yielded an average gross profit of $55,000 nationwide, the highest average gross profit for houses flipped nationwide since 2005, when the average gross profit on flipped houses was $58,750.
Markets with the highest average gross ROI on houses flipped in 2015 were Pittsburgh (129.5 percent); New Orleans (99.2 percent); and Philadelphia (98.4 percent).
In case you missed it, the NYU Furman Center and Capital One have recently released their National Affordable Rental Housing Landscape report, which examines rental housing trends in the nation’s largest metropolitan areas. It’s good news for landlords.
Here are the key takeaways:
- The rental population is booming; in 2014, there were nearly 22 million more renters in metro areas in the U.S. than in 2006.
- While single-family houses are often assumed to be owner-occupied, a sizable and growing portion of renters in the 11 metro areas lived in single-family units in 2014.
- In all 11 metros, and in metros nationwide, a greater share of renter households lived in single-family houses in 2014 than did in 2006. Atlanta, Philadelphia and Houston were the top three cities with the most renters living in single-family houses.
- In all 11 metro areas, the average number of people in each rental household rose.
- In the 11 largest metros, and in metros nationwide, the renter population grew more quickly than the number of rental housing units between 2006 and 2014, putting pressure on rental households.
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