We might be back to 'normal', but the market is changing

[Rob Jafek]

A recent article I found interesting was published by Corelogic, and made two points: 1. home flipping has reached a post-crash high:

and second that acquisition costs have marched higher for fix and flippers. 

And while I would suggest that new ‘post-crash high’ is really just a return to historical averages, I would also agree with this article that the ‘flipping’ dynamic has changed quite a bit over the past few years. In the ‘old days’, many flippers could essentially buy a home at a wholesale price, add a bit of paint and repair, and then sell the home nearer to a retail price, and holding periods in our portfolios were just over 90 days. Today, it’s a different borrower, so much so that we hesitate to call them ‘fix and flippers’, finding the term ‘rehabber’ much more accurate. We’ve observed the housing price increase, similar to the one noted here, but also seen a vast difference in what goes into a project. The authors seem to suggest it’s just that there are fewer distressed properties, but we think there’s much more to it. Now, our holding period averages nearly twice that prior average, and we discuss major renovations and the associated permitting and financing with our borrowers to help assess the risks and mutual expectations and necessary performances.