Category Archives: Real Estate

Home flipping trend weakens

Posted on June 17, 2019 | Leave a comment

Wall Street giants and individual retirees alike have pumped billions into financing home flips in recent years. Now, a slowdown in the flipping business threatens to rain on the party.

So-called “hard money,” which comes from sources other than banks and which carries higher interest rates, is hard to track because it’s fragmented and littered with thousands of small players doing one or two deals a year. However, a for-profit trade group called the American Association of Private Lenders estimates the number of hard money lenders and related “private money” lenders at 8,300, or up almost 40% since 2016.

Most of that money is bound for real estate investors. The volume of loans to people who are buying homes to renovate and resell rose to about $20 billion last year, according to real estate tracker Attom Data Solutions. That’s up 37% from 2016 and almost double the figure from five years ago. Attom can’t be sure how much of that comes from hard money sources versus banks, but industry players believe they make up a majority of such loans.

“There’s a lot of activity. Every time I turn around there’s new entrants,” said Glen Weinberg of Fairview Commercial Lending in Evergreen, Colorado. While he will only loan up to 60% of a property’s value, some of the newer lenders will go up to 90%, Weinberg said.

Big institutions like Blackstone Group LP and Goldman Sachs Group Inc. have gotten into the business, attracted by interest rates of 8% to 12%, as well as two or three percentage points tacked on for the lender. Today, private equity firm KKR & Co. Inc. said it would boost its commitment to Toorak Capital Partners to $500 million from its earlier $250 million investment. Toorak buys short-term home flip loans, sometimes known as bridge loans, from originators. Crowdfunding companies like Atlanta’s Groundfloor Finance Inc. have poured in, too. That company gathers up capital from thousands of small investors and is loaning about $12 million a month, primarily to real estate investors, said co-founder Brian Dally.

Underwater housing increasing

Posted on June 15, 2019 | Leave a comment

At the end of the first quarter of 2019, more than 5.2 million (5,223,524) U.S. properties were seriously underwater (where the combined balance of loans secured by the property was at least 25 percent higher than the property’s estimated market value), up by more than 17,000 properties from a year ago.

The 5.2 million seriously underwater properties at the end of Q1 2019 represented 9.1 percent of all U.S. properties with a mortgage, up from 8.8 percent in the previous quarter but down from 9.5 percent in Q1 2018.

“With home prices increasing at a slower pace in 2018, than in previous years, the potential for people to climb out from mortgages that are underwater or advance into equity-rich territory, tends to be reduced,” said Todd Teta, chief product officer at ATTOM Data Solutions. “However, only one in 11 mortgages are seriously underwater today, compared to nearly one in three during the depths of the recession. Although, if the latest trend continues, it will raise another clear signal of a market slowdown, which will be good for buyers, but not so good for sellers. But if the pattern of the past few years takes hold – with levels of underwater and equity rich mortgages turning around – it will mean the market remains strong for sellers, with fewer needing to get out from under financial distress.”

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New Home Building in San Diego Plummets

Posted on June 13, 2019 | Leave a comment

There were 1,180 residential permits pulled in the first quarter, a drop of 58 percent compared to the same time last year, said the Real Estate Research Council of Southern California. It was the most significant drop of the seven Southern California counties.

The drop was largely the result of a reduction in the seemingly unstoppable apartment market. There were 556 multifamily permits pulled in the first quarter, a drop of 70 percent from 2018. While the apartment and condo market fluctuates heavily, because one approved project can mean hundreds of units, it was still notable because the apartment building pace had also slowed significantly at the end of last year.