Providence is Becoming a Hot Market for House Flipping
Tuesday, March 22, 2016
The Providence housing flipping market is hot -- up more than 23% year over year.
In New England, Providence’s year-over-year increase in number of houses flipped is second only to New Haven’s 45% increase.
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According to the data, the average flip made over $70,000 in the Providence-market.
"That number is alarming. While there is always a place for an investor who buys a house that cannot be financed, fixes it and sells it to someone who can get a mortgage from a bank, we would prefer to have this done locally with 1st time home buyers or people who want to invest a long term presence in our community, rather than with speculators penetrating the market," said Keith Fernandes President of the Providence Apartment Association.
A home flip is defined as "a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by RealtyTrac in more than 950 counties accounting for more than 80 percent of the U.S. population," according to RealtyTrac.
“As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,” said Daren Blomquist, Senior Vice President at RealtyTrac. “Not only is the share of home flips on the rise again, but we also see the flipping trend trickling down to smaller investors who are completing fewer flips per year. The total number of investors who completed at least one flip in 2015 was at the highest level since 2007, and the number of flips per investor was at the lowest level since 2008.”
Providence
Houses getting flipped in Providence are at a much higher average price than those in New Haven. The median home price of a property flipped in Providence is $122,000 and in the New Haven metro area it is $101,000.
"The other factor is a whole generation of buyers has been sitting on the sideline for various reasons, including feat that one was buying in a still declining market. It's apparent to everyone that the Providence non-East Side housing market is extremely buyer friendly, price wise, especially for two and three families, where an owner occupant can live for free and then some after using rent to pay the mortgage," said Santurri
"Stats might show a big gap between the acquisition price of a house, and the "retail" price when it's flipped, but that doesn't account for repairs and carrying costs. I'd put the profit margin of flippers at 10-20%," said Santurri.
There were 110,008 investors or businesses entities that completed at least one home flip in 2015, the highest number of home flippers since 2007, when there were 130,603 home flippers -- just before the collapse of the housing market.
“More inexperienced home flippers with a smaller financial cushion could be a sign of an over-speculative market, but the data indicates that flippers in 2015 continued to operate within relatively conservative margins,” Blomquist said. “Homes flipped in 2015 were on average purchased at a 26 percent discount below estimated market value and re-sold by the flipper at a 5 percent premium above estimated market value.”
Potential Solutions:
United Way of Rhode Island hosted nearly 300 Rhode Islanders in a day-long workshop on last week to focus on this question: How does the lack of affordable safe, healthy homes impact our economy and what can we do to fix it?
Workshops led by DownCity Design, participants engaged in activities that captured actionable responses to address Rhode Island’s lack of housing affordability. With home flipping comes higher prices and decreased affordability. The United Way effort sparked an effort to come up with mapping the issues that prevent Rhode Islanders from accessing quality housing they can afford, before moving to identifying interventions and brainstorming strategies to create new opportunities.
Ideas generated ranged from working with individuals and organizations, to creating public policies that would ease barriers and help more Rhode Islanders into stable, affordable housing. In the coming months, United Way of Rhode Island and DownCity Design will share a report of the ideas generated, along with an action plan to address housing affordability.
According to Fernandez, Mayor Jorge Elorza's program rolled out last fall may help, "The receivership program unveiled by the mayor attempts to start the conversation on how to do this but much more needs to be done. Just don't fall for the Free Seminars you see being advertised about buying houses with no credit or cash and flipping. After all even Trump University couldn't make it's students "great again" It's out of business and being sued for false advertising."
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