Lending in the High Tech Age

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local edition se r v ic i ng or ig i nat ion ANALYTICS a na ly t ic s "As in the boom of the previous decade, many people see easy money to be made." — Chris Cagan, John Burns Real Estate Consulting S e c on da r y M a r k e t Beware of Fake Flippers One consulting firm warns buyers to keep an eye out for scammers looking to get rich off of fakeflipped homes. california // As home price appreciation continues at accelerated levels, John Burns Real Estate Consulting is warning clients in certain areas to keep in mind the artificial boosting effect that home flippers bring to the market. "Home price appreciation has been so rampant, particularly in California and Florida, that flippers and get-rich-quick scam artists are flourishing again," said Chris Cagan, VP at John Burns. "Just as in the mania of 2004–06, flippers make money when the party is raging, but inevitably, someone loses when the party is busted." Using anecdotal data for prices paid, repair costs, and selling prices for flipped homes across the nation, Cagan calculated an average net profit of 32 percent, 54 | The M Report "wildly [surpassing] the reality of the recovering market." Part of the growth in flipping activity, he says, stems from its growing popularity in the media. "Flipping has moved beyond a segment of professionals working with undervalued and distressed properties; seminars, tours, and television shows encourage people to invest with flippers or to flip homes themselves. As in the boom of the previous decade, many people see easy money to be made," he said. Those perceived gains, however, aren't realistic in a market in which prices are rising at 10 percent per year. Given the degree to which prices have risen due to house flipping, Cagan says smart investors must recognize the risk in the market. "Today, the fundamentals for continued price appreciation are very good in the majority of markets," he said. "However, do not assume that recent successes will continue forever and be cognizant of the fact that artificial demand— flippers flipping to other flippers is the ultimate artificial demand—can distort your market." Rising Rates, Prices Lead to Waning Competition in Housing Market Market watchers are seeing a pullback from potential homebuyers who are still bidding on homes. california // Rising prices and interest rates are contributing to less competition in the housing market, but tight inventories leave a majority of homebuyers in bidding wars still, according to a recent survey by Redfin, a national real estate broker and technology provider. While the percentage of bids encountering competition remained a majority at 60.5 percent in August, the rate is down both monthly and annually. The share of bids facing competition in July was 63.3 percent. The year-ago level was 63.5 percent. August's year-over-year decline in competition is the first on record for Redfin's survey, which initiated in 2011. Redfin surveys its agents working in 22 markets across the country. Only three markets experienced increased competition year-overyear in August, including San Francisco, Los Angeles, and Boston. As competition declined, the difference between winning bid prices and asking prices fell just below 0, coming in at an average of -0.3 percent for the month, according to Redfin. Redfin noted only two of the 22 markets it surveyed posted winning bids above asking prices. Those markets were San Francisco, where winning bids were on average 7.2 percent higher than asking prices; and Seattle, where winning bids were 0.2 percent higher than asking prices. Rising home prices and mortgage rates are contributing to the waning bidding wars across the country, according to Redfin. In a survey of homebuyers, Redfin found 63 percent of homeseekers said mortgage rates affected their ability to purchase a home. Twenty percent of buyers said they slowed their home search due to rising rates.

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