Home Front: Flippers back in vogue in Sacramento housing market

House flipping, the timeless buy-low, sell-high strategy, is back.

Thousands engaged in it during the real estate boom. Hundreds are trying it in the bust.

Property researcher MDA DataQuick tells Home Front it is seeing more houses sold within three weeks to six months of being purchased. Almost 5 percent of Sacramento County’s December home sales fell into the “flipping” category.

Today’s numbers rank right up there with the flipping rates of early 2005, just before the housing price bubble burst. At that time, 5.3 percent of Sacramento County sales were considered flips, says DataQuick analyst Andrew LePage. Often-amateur buyers simply bought houses and re-sold them as values rose 25 percent per year. Flipping is one of the factors that eventually spoiled the party and ruined those last arrivals.

By December 2007, with the market collapsing, only 1.7 percent of Sacramento County sales were flips.

But now at the bottom, investors have picked up the game with cheap bank repos. They add carpet, paint and countertops and resell for more, said LePage.

DataQuick statistics say investors accounted for 25 percent of Sacramento County sales in December.

“You’ve been in the 22 to 25.5 percent range for the past year,” LePage said.

It’s one of the reasons first-time buyers say they’re still losing out in bidding wars.

More bank repos coming

Capital-area buyers can expect the repo market share to rise 15 percent in 2010 as banks bring more to market, says Mike Lyon, head of Sacramento’s Lyon Real Estate.

Lyon says the number of repo listings began to swell in December after a year of “numerous government moratoriums.”

Lyon’s research division, TrendGraphix, says strong demand by investors and first-time buyers seeking federal $8,000 tax credits has driven average sale prices for foreclosed homes from $198,000 to $206,000. Lyon says he believes prices for homes under $300,000 will rise until midyear, when interest rates are expected to go up. By then the federal tax credit – scheduled to expire April 30 – will also likely be gone.

Extra spending money

Here’s a welcome flip side to endless reports about people with mortgages they can’t afford: A record percentage of Americans refinanced into smaller, cheaper home loans in the last three months of 2009.

It’s a trend – thanks to lower interest rates – that is freeing up billions of dollars in extra household income.

Federal home loan giant Freddie Mac reported Thursday that 33 percent of borrowers who refinanced in the fourth quarter actually lowered their principal balances. In other words, they got smaller mortgages after having paid off part of their original loans.

Freddie Mac said it’s the greatest quarterly percentage of loan downsizing since it started analyzing refinance activity in 1985.

The fourth-quarter refinancers also knocked about 1 percent off their collective interest rate. That translates into $2 billion in total savings the first year, said Freddie Mac. Alongside savings from smaller mortgages, this is new income to pay down bills, spend in restaurants, buy new cars or otherwise fuel the larger economy.

On the other side of the ledger, a record low 27 percent of those who refinanced in the fourth quarter cashed out some home equity. During the boom era from late 2003 to late 2005 – as house prices rose – it was routine for more than 80 percent of borrowers who refinanced to cash out home equity, Freddie Mac statistics indicate.

In 2009, American homeowners cashed out just $70 billion from their houses, the lowest amount since 2000, according to Freddie Mac. (In 2005: $301 billion). It’s not hard to guess why. Falling home values have eliminated all the equity people otherwise might have extracted.

You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.