The real estate market in California - and around the entire country for that matter - has started heating up. There is a lot of news out there regarding double digit appreciation rates, and houses are selling with multiple offers again. The story that caught my eye, however, had to do with California house flipping rates.
I do a lot of hard money financing for fix and flip investors in California. It does not surprise me that house flipping rates are up, but what did surprise me was the extent of this increase. According to businessinsider.com, the rate of flipping activity in California hit an all time high in February of this year. An all time high, that's a higher rate than during the housing bubble!
At the height of the market, house flipping rates were about 4.3%. In February of this year the rate for California as a whole hit 5.3% - meaning about one in every twenty sales is a flip transaction (the percentage of homes on the market that were previously sold within the past six months). That's a big number, especially when you remember how much investor activity there was during the real estate boom.
So does this mean another bubble is forming? I don't know that these numbers indicate the same type of bubble activity that they did at the height of the real estate market. At the height of the real estate market, flipping houses was fairly speculative. The market was hot and prices were increasing, so speculation was high. Right now, however, the driving factor seems to be less speculation and more depressed values.
With investors able to purchase distressed properties through foreclosure, bank owned sales or short sales right now there is a sort of perfect storm brewing. Properties are available to acquire at under market value and the resale market is strong. The two forces combined have led to this record house flipping rate. Whether these conditions continue, and for how long, is anyone's guess, but right now many investors are making good money fixing and flipping homes.
With the housing market improving, the hard money financing I am able to offer to fix and flip investors is also getting more aggressive. This is good for those in the business of flipping houses as it allows them to leverage their capital more. It is also good for new investors looking to get started as it allows them the ability to finance more, and thus requires less cash upfront to get started in a business where, traditionally speaking, the barrier of entry is fairly high with regards to required cash to work with.
For more information on alternative financing programs, please read about the types of California hard money loans we are able to offer. We are able to help finance most property types in California, including rehab transactions and construction completion projects. In addition, we can help finance properties based on their completed or fully rehabbed value.
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