Cool Tools News Spool

Category: Investment

  • RealtyTrac says more investors and less cash

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    RealtyTrac released an interesting report recently that showed the share of homes purchased by owner occupants dropped to 63.2% in the first quarter, the lowest level since 2011 when they started tracking the data. This is down from 65.8% last quarter and 68.6% a year ago.

    RealtyTrac considers anyone who has the property tax bill mailed somewhere other than the property address to be a non-owner occupant, so it could include vacation home buyers in addition to investors.

    Among non-owner occupants, a much smaller 44.7% were cash buyers, down from 61% a year ago. Institutional investors represented 3.4% of all buyers, down from 6.1% last year and the lowest share in 4 years.

    This suggests that smaller, more traditional real estate investors are becoming more active in the market. It also suggests that buyers are taking advantage of relatively easier credit requirements to use mortgage money to complete their purchases.

    Three of the top 5 metro areas for investor activity were in FL, and no TX cities made that list, which makes sense given that FL cities led the nation in REO sales. More interesting, I think, is the shifting focus of institutional investors. Memphis and Charlotte topped the list of markets having the most institutional investor activity.

    Click here for the full report.

  • House flipping just got harder

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    FHA has never been a big fan of house flipping due to fraudulent flips that saddled it with big losses in years past. As a result, it instituted a rule that in order for a buyer to use FHA financing, the seller must have owned the house for 90 days prior to signing a purchase contract.

    During the housing recession, FHA decided to waive this rule, allowing sellers to flip houses after owning the property for as little as 30 days. The waiver allowed real estate investors to make tidy profits selling thousands of rehabilitated homes to FHA buyers.

    The waiver expired on Dec 31st. For any purchase contract signed after that date, the old 90-day rule applies. FHA says the dangers of house flipping outweigh the benefits for first-time and minority homebuyers – those dangers being that flippers will sell poorly renovated homes at inflated prices to unsuspecting buyers. Of course, investors disagree and point out that the house flip rule only raises the cost of renovated homes. Flippers say they can rehabilitate a home in 45 days. Having to hold the home for an additional 45 days just increases the flippers’ holding costs, which get passed along to the buyer.

    If you’re working with investors, this change affects the pool of potential buyers. While they won’t be able to sell to FHA buyers for 90 days, they can sell to buyers using conventional financing as Fannie and Freddie only require a seller to own a home for 30 days.