– Average Home Flipping Returns Drop to 6.5-Year Low; Share of Flips Sold to FHA Buyers at a More Than 10-Year Low
– Share of Home Flips Purchased with Financing Decreases From 10-Year High in Q2 2018
ATTOM Data Solutions, curator of the nation’s premier property database, today released its Q3 2018 US Home Flipping Report, which shows that a total of 45,901 US single family homes and condos were flipped in the third quarter of 2018, down 12% from a year ago to the lowest level since Q1 2015 — a 3.5-year low. Homes flipped in Q3 2018 represented 5.0% of all single family home and condo sales during the quarter — down from a 5.2% home flipping rate in Q2 2018 and down from a 5.1% home flipping rate in Q3 2017 to the lowest level since Q3 2016. “Home flipping acts as a canary in the coal mine for a cooling housing market because the high velocity of transactions provides home flippers with some of the best and most real-time data on how the market is trending,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “We’ve now seen three consecutive quarters with year-over-year decreases in home flips. The last time that happened was in 2014 following the mortgage rate jump in the second half of 2013, but it’s still far from the 11 consecutive quarters with year-over-year decreases in home flips extending from Q2 2006 through Q4 2008 and leading up to the last housing crash.” Homes flipped in Q3 2018 sold for an average of $63,000 more than what the home flipper purchased them for, down from an all-time high average gross flipping profit of $68,000 in the first quarter and down from an average gross flipping profit of $65,000 a year ago to the lowest level since Q2 2016.
The average gross flipping profit of $63,000 in Q3 2018 represented an average 42.6% gross flipping return on investment, down from an average 44.1% gross flipping ROI in the previous quarter and down from an average 48.1% gross flipping ROI in Q3 2017 to the lowest level since Q1 2012 — a 6.5-year low. The share of homes flipped that were sold by the home flipper between $100,000 to $200,000 made up 31.6% of all flipped sales, while those flip sales that occurred on homes sold for more than $5 million saw the highest gross flipping return on investment (ROI) of any price range.
Sales Price Range Share of Total Home Flips Gross ROI
Under $50K 6.3% 20%
$50K – $100K 9.3% 50%
$100K – $200K 31.6% 55%
$200K – $300K 24.8% 39%
$300K – $400K 12.1% 31%
$400K – $500K 6.0% 30%
$500K – $750K 6.2% 27%
$750K – $1M 1.8% 26%
$1M – $2M 1.6% 28%
$2M – $5M 0.3% 43%
Over $5M 0.1% 187%
States with the highest average gross flipping ROI in Q3 2018 were Pennsylvania (96.7%), Ohio (90.4%), Kentucky (84.7%), Louisiana (82.4%), and Michigan (78.6%). Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest average gross flipping ROI in Q3 2018 were Pittsburgh, Pennsylvania (136.7%); Cleveland, Ohio (120.2%); Atlantic City, New Jersey (110.3%); Scranton, Pennsylvania (109.0%); and Philadelphia, Pennsylvania (107.9%). Among 1,264 US zip codes analyzed in the report with at least 10 flips during the quarter, those with the highest average gross flipping ROI in Q3 2018 were 33993 in Cape Coral, Florida (881.0%); 41091 in Cincinnati, Ohio (631.0%); 40356 in Lexington, Kentucky (421.1%); and 21216 (410.4%) and 21218 (357.1%), both in Baltimore, Maryland. Arizona had the highest home flipping rate among all states in Q3 2018 (7.7%), followed by Tennessee (7.5%), Nevada (7.2%), Alabama (6.6%), and Maryland (6.0%). Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest home flipping rate for the quarter were Memphis, Tennessee (10.4%); Atlantic City, New Jersey (9.1%); Phoenix, Arizona (8.6%); Las Vegas, Nevada (7.8%) and Huntsville, Alabama (7.5%). Among 1,264 US zip codes analyzed in the report with at least 10 flips during the quarter, those with the highest home flipping rate were 38115 in Memphis, Tennessee (28.1%); 33142 in Miami, Florida (27.3%); 11717 in Brentwood, New York (27.1%); 75224 in Dallas, Texas (26.8%); and 11436 in the county of Queens, New York (25.6%).
Homes flipped in Q3 2018 that were originally purchased with financing by the home flipper represented 38.8% of all homes flipped during the quarter, down from 40.7% in the previous quarter and down from 39.2% a year ago. States where the% of flips that were purchased with financing in the third quarter of 2018 that were well above the national average of 38.8% included; the District of Columbia (67.2%), Colorado (55.7%), Minnesota (52.1%), New Hampshire (52.0%) and Rhode Island (49.2%). Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest% of home flip sales purchased with financing in Q3 2018 were Madison, Wisconsin (62.5%); Colorado Springs, Colorado (62.2%); Cedar Rapids, Iowa (60.4%) Manchester, New Hampshire (57.6%) and Greeley, Colorado (56.9%). Of the homes flipped in Q3 2018, 12.7% were sold to buyers using loans backed by the Federal Housing Administration (FHA) — likely first-time homebuyers — down from 16.1% in Q3 2017 to a 10-year low. Among 53 metro areas analyzed in the report with at least 1 million people, those with the smallest share of completed flips sold to FHA buyers in Q3 2018 were San Jose, California (1.5%); Raleigh, North Carolina (3.8%); Las Vegas, Nevada (5.1%); San Francisco, California (5.7%); and Memphis, Tennessee (5.8%). Among the 53 metro areas analyzed in the report with at least 1 million people, those with the highest share of completed flips sold to FHA buyers in Q3 2018 were Riverside, California (24.3%); Baltimore, Maryland (23.0%); Chicago, Illinois (21.1%); Philadelphia, Pennsylvania (20.5%); and San Antonio, Texas (20.2%).
– The median year built of homes flipped in Q3 2018 was 1978, the third consecutive quarter for the oldest median year built as far back as data is available — Q1 2000.
– The median square footage of homes flipped in Q3 2018 was 1,408, the smallest median square footage as far back as data is available — Q1 2000.
– A total of 37,905 entities flipped properties in Q3 2018, a ratio of 1.21 flips per entity, the lowest ratio of flips per entity since Q4 2007 — a nearly 11-year low.
– The average time to complete a home flip was 179 days, down from 185 days in the previous quarter, and down from 180 days in Q3 2017.
US employers added 155,000 jobs in November, missing expectations
US employers added 155,000 jobs in November, missing Wall Street’s expectations for an increase of 200,000 jobs, after an already rocky week for stocks exacerbated on Thursday by investor fears that a U.S-China trade deal could be reneged amid newly inflamed tensions. The unemployment rate remained steady at 3.7%, the lowest rate in 50 years, while the labor force participation rate also stayed the same at 62.9% during the month. Average hourly earnings meanwhile rose by 6 cents to $27.35. Over the year, average hourly earnings have increased by a total of 81 cents, or about 3.1%. Although it was a weaker-than-expected number, experts portrayed the data as another good report, particularly regarding wage growth. It’s the 98th-straight month of gains and indicates that despite a slight miss, the labor market remains robust and the economy strong. “Wage growth remains respectable with the 3.1% gain in average hourly earnings over the past year,” said Mark Hamrick, senior economic analyst for Bankrate.com “That’s not a lottery jackpot, but it also doesn’t set off inflation alarm bells for financial markets or central bankers.
CoreLogic – homeowners with negative equity declines by only 81,000 in the third quarter of 2018
– Smallest quarter-to-quarter decline in negative equity since economic recovery began in 2010
– Homeowners had an average annual home equity gain of $12,400 in the third quarter of 2018, the smallest annual increase in eight quarters
– The annual equity gain in the national CoreLogic Home Price Index slowed to 5.4% in September, compared with 6.2% in June, reflecting slowing price growth
CoreLogic released the Home Equity Report for the third quarter of 2018. The report shows that US homeowners with mortgages (which account for roughly 63% of all properties) have seen their equity increase by 9.4% year over year, representing a gain of nearly $775.2 billion since the third quarter of 2017. Additionally, the average homeowner gained $12,400 in home equity between the third quarter of 2017 and the third quarter of 2018. While home equity grew in almost every state in the nation, western states experienced the most significant increases. California homeowners gained an average of approximately $36,500 in home equity, and Nevada homeowners experienced an average increase of approximately $32,600 in home equity. From the second quarter of 2018 to the third quarter of 2018, the total number of mortgaged homes in negative equity decreased 4% to 2.2 million homes or 4.1% of all mortgaged properties. Year over year, the number of mortgaged properties in negative equity fell 16% from 2.6 million homes – or 5% of all mortgaged properties – in the third quarter of 2018. “On average, homeowners saw their home equity increase again this quarter but not nearly as much as in previous quarters,” said Dr. Frank Nothaft, chief economist for CoreLogic. “During the third quarter, homeowners gained an average of $12,400 compared to the second quarter when the average home equity wealth increase was more than $16,000. This lower year-over-year gain reflects the slowing in appreciation we’ve seen in the CoreLogic Home Price Index.”
Negative equity, often referred to as being underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009. The national aggregate value of negative equity was approximately $281.6 billion at the end of the third quarter of 2018. This is down quarter over quarter by approximately $1.1 billion, from $280.5 billion in the second quarter of 2018 and down year over year by approximately $2.7 billion, from $279 billion in the third quarter of 2017. “The number of homes in a negative equity position have remained around 2.2 million for two consecutive quarters this year,” said Frank Martell, president and CEO of CoreLogic. “Without equity, those homeowners are unable to sell their homes and are more likely to transition from delinquency to foreclosure if they face financial distress.”
Huawei CFO extradition order was an independent act by the DOJ
A top Huawei telecoms executive was arrested in Canada on Saturday at the request of the US, clouding a trade deal with China and forcing the stock market to claw back from its deep losses on Thursday. Huawei Technologies CFO Meng Wanzhou was arrested in Vancouver on Dec. 1 and faces extradition to the US White House trade adviser Peter Navarro told FOX Business the White House had no prior knowledge of the Huawei executive’s detainment, or of the Justice Department’s actions prior to President Trump’s dinner with Chinese President Xi Jinping at the G20 Summit in Argentina. “The Justice Department acts independently when it prosecutes felonies, and that’s the case that we have with this particular case,” he said during an interview on “Trish Regan Primetime” on Thursday. Wanzhou, 46, was arrested by Canadian authorities as part of an US investigation into an alleged scheme by Huawei to use a global banking institution to make illegal transactions involving Iran, Reuters reported. An overseer at HSBC Holdings flagged the suspicious transactions by the world’s largest telecom company. The arrest of the Huawei CFO fueled trade concerns with a Chinese state-run newspaper claiming its “declaration of war.” Navarro said the 90-day tariff truce between the world’s two largest economies remains strong. “Is China going to follow through on all the structural changes it needs to make in order for them to be a good member of the international trading society? It remains to be seen,” he said.
MBA – Broeksmit Statement on Kraninger confirmation
Robert D. Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA), released the following statement regarding the confirmation of Kathleen Kraninger to be the next head of the Bureau of Consumer Financial Protection (BCFP). “Kathy Kraninger is an intelligent, experienced administrator who has worked on a broad range of complex, high-profile issues over the course of her career. We look forward to working with her and anticipate she will continue the Bureau’s efforts to protect consumers by providing financial institutions clear and understandable regulations accompanied by appropriate compliance and implementation requirements.”