Higher home prices in Portland causing house flippers to Pull Back: lower profitability for flip style investing
The Portland Market is considered one of the last affordable West Coast markets, but we have been seeing a pull out of major investors from single family residential homes. One reason for that is the growth of the commercial side of the Real Estate Market (especially the central industrial Eastside); but another is the lowered profitability in flip-style investing. Higher home prices in Portland translate to smaller margins. (If you ignore those annoying radio commercials you’ll hear differently!)
“Many flippers are gravitating toward lower-priced areas where discounted purchases are more readily available — often due to foreclosure or some other type of distress. Many of those lower-priced areas also have strong rental markets, giving flippers a consistent pipeline of demand from buy-and-hold investors looking for turnkey rentals.” That would pull them from Portland and surrounding areas, where new short sales and foreclosures are minimal, and our yearly average rate of return is nearly 10% (meaning many sellers are pocketing their own profits, and not needing to reduce prices below market value to get a quick sale).
That is great news for the average buyer. When you have less competition from “all-cash” investors, you stand a better chance of getting into a first time home purchase, or being able to switch neighborhoods with less likelihood of a bidding war. I have seen the increase in inventory creeping up lately (we are currently at 2 months, which is the highest we have seen it for over a year). One other advantage of that is that buyers have more homes to view. There is still a feeling of urgency to purchase as home prices are continually rising (at a rate aross Portland of 9.6% annually currently), but it is great to know that the market is still accommodating to the average family (or single buyer) looking to invest into their own living situation!
Full article here.