Flippers: A perfect example of my earlier point
Flippers: A Perfect Example Of My Earlier Point OfferPad Incentivizes Realtors On May 7th, I wrote a post to help Sellers understand the pitfalls, THE
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When we were finally able to see Covid in the rear-view mirror, clients, friends and acquaintances were asking “is the sky falling?”.
My answer then is my answer today, NO!
However, the cause of this concern, in my opinion, is seeing the drastic drop in list prices; not sale prices.
Unlike the Mortgage Crisis of 06′, the “Covid influenced value spike” was not caused by unrealistic terms on mortgages and the ease and availability of financing. This time it was Cash Buyers that led the market to new heights.
In South Florida, we saw a tremendous influx of New Yorkers and other parts of the NE, leaving small and high priced coops and condos, for life with water and grass at your doorstep; not to mention, square footage that would cost 10 times as much back in the City. And these buyers came with Cash.
Many of the buyers that were caught up in the Mortgage Crisis, didn’t understand the terms of their loans, namely the “pic a pay” aka “negative amortization loans” or simply took advantage of the low minimum payments that came in the first 3-5 years of a Neg Am loan. And some knew they couldn’t afford the home, but when the bank is offering a loan that is higher than the homes value, at time of purchase, took the money and ran. Literally. And left the market with vacant, unkept homes that dragged the overall market down.
We don’t have any of those ingredients during or since Covid.
And because we don’t, we are seeing annual growth rates returning to normal or modest numbers in the 3-7% range. So what we’re seeing is reality setting in; not desperation.
For example, during and immediately following Covid, if 123 Main St. listed and sold for $700k, their neighbor with a similar home at 246 Main St. would list for $800k or higher. Whereas, in a normal market, or now, the neighbor is lowering to or starting closer to $700k to $725k, maybe $750k.
This is a loss of equity, not a net loss against the price paid for the home; which is what we saw in ’06.
However, I am seeing rare and infrequent examples of a net loss. Just yesterday I saw a home sell for $4m, after a sale price 2-3 years ago of $4.4m.
In the aftermath of the Mortgage Crisis, I remember thinking back to a few homeowners who eventually lost their homes to Foreclosure or Short Sale. And the only reason this happened, in some, maybe too many cases, was GREED.
Greed occurred when a Seller refused to accept reality. Refused to see what was happening and what they were being told. Like trying to pull an Alcoholic from the Bar, or a gambling addict from the Casino, you might eventually succeed, but it may be too late.
Today’s sellers need to remember ’06 or they will start a great slide, seeing more net losses; not just some equity.
Home selling profits continued to decline due to a decrease in the median nationwide home price, according to the latest data from ATTOM.
ATTOM’s Home Sales Report for Q1 2024 saw profit margins on median-priced single-family home and condo sales decrease to 55.3%—the smallest level in more than two years. This reading was down from 57.1% in Q4 2023 and from 56.5% a year ago
As mentioned, the decrease is attributed by ATTOM to a drop in the median nationwide home price, which went down quarterly by 4.3% to $330,000.
Key highlights:
Major Takeaway:
“The latest price and profit numbers show notably downward trends, which raises new questions about whether the housing-market boom is indeed ebbing, or even ending, after so many years of improvement,” said Rob Barber, CEO for ATTOM. “But due caution is needed in looking at the first-quarter data and what the patterns mean. We saw a similar downward pattern from late 2022 into early 2023, and then the market surged. Plus, profits and profit margins still are very high by historical measures. Amid all that, the Spring buying season will be a huge barometer for whether the market still has steam in its engine.”
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