With all respect to our friends at the LA Times and NPR, they’re a little late with their reporting on the current “home flipping frenzy.” Fact is, rehabbers have been a driving force in LA real estate for months now. Granted, the number of trucks, cement-mixers and porta-potties lining residential streets seems to have peaked of late. But going back over a year, and in some cases longer, house flippers have been acquiring, renovating and re-selling LA homes for profit. The impact on inventory has been significant, and by consequence we’ve seen values appreciate across the board. So what’s next? For all this flipping business, what does it mean for you?
For starters, it means there are lot less fixer-uppers out there. Buyers seeking bargains or a “diamond in the rough” will be challenged to find one, since so many rehabbers are looking for the exact same thing. Secondly, as these buyers who missed out on bargains revise their budgets upward, settling for more “turn key” type homes, it creates competition for dwindling inventory that is downright fierce. Jed Kolko, chief economist for real estate website Trulia, says: “Consumers are worried that mortgage rates and prices will keep rising before they buy, and many are willing to fight over the limited number of homes for sale.” KPCC ran a piece this morning that echoes that sentiment, you can listen to it here.
This might sound a bit bleak for prospective home buyers, but don’t despair: relief may well be in sight. House flippers are indeed active right now and will likely be around for awhile. But with such low inventory, many rehabbers have already packed up and left LA for greener pastures. Furthermore, rising interest rates are having the intended effect of putting the brakes on things. We don’t predict that prices are going to decline anytime soon, and the vast majority of economists agree. But as more potential sellers realize they have regained much — if not all — of their home equity, we can easily envision a scenario where more residences are brought to market. Add to that the new housing developments that are taking shape to meet rising demand… It certainly appears that the clouds are clearing a bit for home buyers. And that’s a very good thing.
To stay ahead of this market, as either a buyer or seller, you will truly benefit from talking with professionals who know LA and Pasadena real estate inside and out. We’d love to hear from you. Contact us anytime at Tracy Do Real Estate.
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“Flip or Flop” (image above) courtesy of HGTV, via the LA Times website.
From Alejandro Lazo of the LA Times: “Sales of previously owned U.S. homes rose in July, as more inventory hit the market and an increase in mortgage interest rates likely motivated buyers. Sales were up 6.5% from the prior month and 17.2% from the same month a year earlier.”
