You knew it was only a matter of time before home flipping shows made it back to the reality circuit. No longer are people watching Canadian real estate bubble shoppers and having people edit out any reference to the city (or country). 2012 brought out a furious jump in California real estate activity. A perfect artificial market with the Fed as puppeteer has boosted the market for the short-term. Remember however that the Fed was also instrumental in setting the stage for the first housing market boom by lowering rates and essentially ignoring the nonsense going on in the global mortgage markets in the early 2000s. So those that put all their faith in the Fed need only look back a decade or so. Yet the force of flippers in California is so intense that you can see it in the eyes of some investors that “this time is really different and we are back in the game!â€Â In Highland Park, we see an expert flip but also examine the current state of the housing market. To buy or not to buy, that is the question.   Â
California home prices experienced a big surge in 2012. This might fly in the face of stagnant household incomes but the incredible push for lower interest rates and reliance on low down payment FHA insured loans has brought many people off the fence. In Southern California home sales are up by 14 percent over the last year and the median price is now up by 16 percent. The median price is largely being pushed by the mix of home sales. Distressed properties are making up a smaller pool of sales. With low inventory, you have regular home buyers competing also with house flippers, big Wall Street buyers, and foreign money with limited supply on the market. The result has been to push home prices much higher making it more difficult for middle class families to afford a home. As we approach the end of 2012, let us look at the data for Southern California.
Shadow inventory is still very much a part of the housing market. This inventory is slowly making its way through the system. Once the home is on the market for sale, it is no longer in the shadows. With constrained inventory and interest rates providing a boost to the leverage a buyer can take on, banks are slowly leaking out more of these properties for your viewing consumption. People have asked how is it that so many people can be living in homes without making a payment. Shadow inventory is simply a modern day oddity of this housing market. In any other typical housing market you would see inventory increasing either through new building or people putting homes for sale given the uptick in home values. Yet millions of Americans, over 10 million cannot sell because they are underwater. Over 4 million are deep in distress. Speculation about the shadow inventory draw down for 2013 is already coming out.
Flippers have targeted favorite areas like Silver Lake and Culver City for many years. Silver Lake in particular has brought in a larger number of flippers that are catering to the hipster crowd. One big change I have noticed in the past decade is the lack of consideration for a down payment. There was a time where a person or a couple actually tightened their belts for a few years to come up with the 10 or 20 percent down payment required to purchase a home. Today, with low down payment loans like FHA insured products I rarely hear this conversation. You buy when you feel like it. Think about it. For a $500,000 home you would need $17,500 for the FHA portion. That is it. So this part of the market has certainly transformed. Yet I’m noticing flippers all over the place now including Burbank. The asking prices are now very similar to what we saw during the mid-2000s. Today we salute you Burbank with our Real Homes of Genius Award.
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