Home Flipping in Fresno is Still Hot!

Trulia ranked Fresno as the second hottest house flipping market in the nation. At that time, flips comprised 7.6 percent of the local real estate market. This year, Fresno remained within the top five most active flipping markets nationwide. Fresno flips grew .3 percentage points over the past year and now comprise 8.2 percent of all homes on the market.

National home flipping activity saw its first uptick in three years to reach 6.1 percent of the market. Meanwhile, home prices rose the most since 2006 at 5.9 percent year-over-year growth. That is the largest year-over-year home price jump seen since the mid-2000s.

Fresno Flips and Home Prices

Flipping is regarded as both positive and negative for the housing market. On one hand, more investors in your area likely means you reside in a strong housing market with profit potential. But, when flipping becomes too prevalent, it promotes inflated home prices. This can lead to an overheated market, which can eventually turn into the dreaded bubble.

Flippers target emerging markets because rising home prices act as a safety net in case renovations fail due to budget or zoning issues. However, when many investors purchase large portions of the real estate stock and sell them off quickly at higher prices – without improving the structure itself – the overall market becomes more expensive. In a housing market bubble, homes cost more than their true value. Ordinary buyers pay premiums, and if the bubble bursts, end up underwater on their mortgages because they owe more than their home is worth.

However, Trulia’s economists say the current flipping market in Fresno isn’t cause for concern. Fresno home prices grew 4.5 percent over the past year, so it’s not much of a surprise that flipping is hot. Plus, Fresno is far off from its flipping peak in 2013. Just four years ago, flips comprised 9.5 percent of the total real estate market.

In addition, the correlation between growing home prices and rising flipping activity is not as strong as it was in previous years – particularly periods where the market was severely down or largely overvalued. After home prices bottomed out in 2013, the relationship between flipping and home prices peaked at 0.6 on a scale of -1 to 1, where both extremes indicate a strong relationship. Today, the correlation is a healthy .25, considerably softer than it was during the bubble years when the relationship floated between 0.5 and 0.6.

Controlled and authentic home flipping offers benefits for many home buyers in Fresno. With a greater selection of renovated properties, buyers avoid the headache of undergoing repairs on their own time.

By Jennifer Riner, Trulia

What’s Ahead For Fresno Housing Market in 2014?

Well, 2013 was an amazing year for property value comeback. We had an approx. 13% increase in property values overall. This really helped because we lost so much in the downturn for a few years. The market activity really peaked in mid summer, and there has been a very slow but steady decline of sales activity ever since. 2014 is starting out, with relatively low inventory of available homes, which is keeping the values strong, but I do believe that this will change as people realize that they can sell now because they have gained some equity. I know that there is “pent up” demand for people that want to sell their homes, that have been waiting on the sidelines for their values to increase. Well now is the time if ever, to put that home on the market in 2014. Most analysts are predicting single digit appreciation in 2014, so it wont really pay to wait and see. There have also been some changes in the mortgage industry, that will affect the market. For one, FHA has lowered their maximum mortgage amount from $381,250 to $281,250. and FHA had earlier in 2013 raised their mortgage insurance premium costs. This is unfortunate, because Fresno is a huge FHA market with approx. 70% or transactions getting FHA loans. On the other side, conventional financing is many time more attractive with slightly higher 5% minimum down payments. Interest rates are definitely on the rise in 2014 and their have been other important changes in qualifying for a loan. Starting tomorrow Jan. 10. 2014, new lending guidelines, referred to as QM, which stands for “qualified mortgage lending and borrowers ability to repay”. Borrowers must have a maximum 43% debt to income ratio, and they are not considering “compensating factors”, such as a higher cash down payment, assets or money reserves in the bank. It’s all about your income and debts and credit scores period! So if your in the market to buy a home and have been pre-qualified, you really need to meet with your lender again to get a conditional loan approval. Policies have changed now and we need to make certain buyers can qualify under the new guidelines. I look forward to working with more sellers and buyers this year, particularly the “move up” type buyers. I believe that the investors flipping homes is slowing down, because their are fewer opportunities in foreclosures, so 2014 could be the year for “move up” buyers to sell their homes and buy up or downsize. Cash is still king!

Fresno Home Prices: Home Prices and Fresno MLS Inventory on the Rise

Good news on the active home listing inventory, as we now have over 1000 listings of single family homes and condominiums currently active in the Fresno MLS system and the trend is now towards an increase inventory and this is happening in other California cities as well as Fresno and Clovis. This is higher than a month ago, or 3 months ago when the inventory was at 775. I think we are turning the corner on inventory and we are going to see a slow and steady increase in inventory. The gain in inventory, is related to the increase in home values, which are making it possible for many sellers to sell now after declining values of past couple of years. Interest rates have also gone up about 1 percentage point over the past couple months. The combination of these two factors are bringing the realization that it really is a good time to sell for many sellers. Unfortunately this could also be somewhat of a bubble effect, due to supply and demand. Prices may level off and stay flat because the overall economy is still weak and unemployment numbers are still high. We need about 2500 homes on the market to be more balanced with the current demand, so we have quite a ways to go yet, but the rising inventory I believe is a positive sign for home buyers. It has been so difficult for home buyers over the last two years, with bidding wars on nearly all clean listings.