Wednesday, 24 July 2013

Home flipping making comeback in US housing market

Home flipping is making a comeback in new parts of the country. Deals rose nearly 20 percent compared with last year, RealtyTrac reports.
House flipping, in which investors buy homes and sell them within six months for a profit, thrives in environments where home values are surging and inventory is low. Combined with low interest rates, a slowly improving jobs market, and greater consumer confidence, more Americans are now willing to buy.
House flipping deals are on track to hit a record this year, RealtyTrac reports. Profits were up 19 percent in the first half of 2013 from a year ago and 74 percent higher than 2011. Profits are also climbing to the highest in seven years, with investors making an average $18,391 on each sale, more than triple returns in the first six months of 2012 and compared with losses of $13,206 two years ago.
“Flippers need to buy low and sell high, so flipping is most profitable where the home price recovery is in its early stages and where a recent rebound in foreclosure activity allows investors to find distressed inventory at a discount,” said Daren Blomquist vice president at RealtyTrac.
But this comeback brings a shift in the country's flipping hotspots. As large scale institutional investors scooped up huge groups of distressed properties in markets worst hit by the housing bust, prices rose in traditional flipping markets, like Atlanta and Phoenix, making them less attractive to buyers.
New profitable cities in the house flipping industry include Pittsburgh; Daytona Beach, Fla.; and Charleston, S.C.

US exit from quantitative easing could cut London house prices

A new report has identified the withdrawal of US investment as a threat to central London property prices.
As London’s prime residential property prices rise even further relative to the rest of the UK, a new report commissioned by Development Securities PLC and carried out by Fathom Consulting, today concludes that while economic drivers can partially explain this growing premium, a proportion remains difficult to explain – the core characteristics of an asset price ‘bubble’.
The report, Prime Central London: One year on, and even higher, uses a unique statistical model to identify the key economic drivers behind Prime Central London’s (PCL) price movements. These are materially different from those affecting house prices in the rest of the UK, and include: global equity prices; the relative value of sterling; and safe-haven flows. Over long periods of time, the model has accounted for 85% of the movement in PCL prices. The report finds that the price of a typical property in PCL is now more than 6.5 times the national average, and has risen by almost 20% since the time of our first report published last year. 
Moreover, PCL prices are more than 10% higher than Fathom’s economic model suggests they ought to be. PCL valuations now seem less sustainable and more vulnerable to correction.
The report identifies that the biggest threat to PCL property prices would be the failure of the US Federal Reserve to engineer a smooth exit from its Quantitative Easing programme. By tapering too soon and implementing a simultaneous tightening of both fiscal and monetary policy, the report identifies a risk that the US Federal Reserve sparks a fall in the price of assets, including PCL property. The report warns that a disorderly unwinding of the US QE programme could knock around 40% off global equity prices and about half of this amount off PCL property prices.

Michael Marx, Chief Executive of Development Securities PLC, said: "We remain convinced of the underlying attraction of Prime Central London property. As a place in which to live, Prime Central London is unique. But of course that does not make it immune from the laws of supply and demand. With the average Prime Central London property now a little under £1.5 million, valuations have never been more stretched. We are less confident now than we were back in May 2012 that Prime Central London prices are sustainable.”
Danny Gabay, Director of Fathom Consulting, said: “With the prospect of a euro break-up moved to the back burner, ‘tapering’ by the US Federal Reserve has come to the fore as the biggest threat to PCL prices. The gradual withdrawal of monetary stimulus by the world’s largest central banks risks removing one of the key supports to global asset prices, including PCL. In the event that tapering triggers a sharp fall in asset prices, the response of sterling will be key. If Bank of England Governor Carney can convince markets that a policy tightening in the UK remains a very distant prospect, sterling may fall against the US dollar, and against other currencies more generally. This would mitigate some of the downward pressure on PCL values.”

Tuesday, 23 July 2013

US house prices rise 7.3% in year

U.S. house prices rose 7.3 percent in the year through May as buyers competed for a small supply of listings, according to to the Federal Housing Finance Agency.
Prices increased 0.7 percent on a seasonally adjusted basis from April, the FHFA said in a report today from Washington. The average economist estimate was for a 0.8 percent gain, according to data compiled by Bloomberg.
Real estate values are climbing as improving employment helps draw buyers into the market for a tight inventory of homes. A separate report today from Zillow showed U.S. home values rose 2.4 percent in the second quarter from the previous three months. It was the biggest gain for a second quarter since 2004, the Seattle-based property-research company said.
“The U.S. housing market as a whole is currently not experiencing a bubble, but in many places it sure must feel like one,” Zillow Senior Economist Svenja Gudell said in a statement. “Homeowners are feeling a sense of whiplash after years of depreciation.”
The limited supply and higher mortgage rates may be restraining purchases. Sales of previously owned homes unexpectedly slipped 1.2 percent in June to 5.08 million annualized rate, the National Association of Realtors reported yesterday. The number of properties on the market last was month was the fewest for any June since 2001.

Market ‘Excitement’

The average rate for a 30-year fixed loan was 4.37 percent last week, up from a near-record low of 3.35 percent in May, according to Freddie Mac.
“Our inventory is incredibly low right now,” Margaret Kelly, chief executive officer of Re/Max LLC, a Denver-based network of real estate agencies, said on Bloomberg Television’s “Market Makers” with Sara Eisen and Deirdre Bolton. “When you have low inventory, high demand, prices rise, you’ve got a lot of excitement in the market. I think once we see inventory rise a bit, you’re going to see some of those things calm down. It’ll be more of a normal market.”