Not Saying There’s a Housing Bubble But…

Record Debt Outstanding

Over the past couple of months the big banks (Wells Fargo & Co., Goldman Sachs Group Inc. and J.P. Morgan Chase & Co.) have begun offering credit lines to lenders that specialize in house flipping (investor buys a property, makes updates then quickly resells it). The amount of loans outstanding for house flippers neared $48 billion in 2016. That’s the highest since 2006, the peak of the housing bubble. Through the 3rd quarter of 2016 the number of home flippers hit it’s highest level since 2007. House flipping deals tend to typically be done with cash, however in 2016 one third of the deals were made with debt. That’s the highest in over 8 years!

Low Doc Loans Making a Comeback?

Home prices nationwide are the highest they’ve been since the 2008 crash. Some borrowers have reported that they’ve been offered loans that exceed the value of their homes. Others have reported that lenders are relaxing their loan requirements by requiring bank statements but not the standard W-2 tax documents. Additionally more and more people are getting in on the flipping action. Seminars are popping up left and right teaching people how to flip homes and promising boatloads of cash. The average flip nets approx $61k, this is up from $19k at the bottom of the crash in 2009.

If It Walks Like a Duck and Quacks Like a Duck…

Hmmmm I’m not saying a bubble is brewing, but c’mon son, judging from the previews this movie is looking pretty familiar. It might be time to start slowly increasing our cash positions in order to be able to take advantage of opportunities and/or ride out the storm in the event of a downturn. The economy naturally tends to correct itself every 10 or so years and guess when the last recession occurred, 2007.

Martel