Mortgage rates moved incrementally higher over the past week but are still treading in the shallow sub 4% water. And those favorable rates — along with a shortage of home inventory — are pushing house flipping to its highest level in two years.
Freddie Mac’s just-released weekly survey of lenders shows the following average rates for the most popular home loan terms:
- 30-year fixed-rate mortgages averaged 3.66% with an average 0.5 point for the week ending June 2, 2016. A year ago, the rate averaged 3.87%.
- 15-year fixed rates averaged 2.92% with an average 0.5 point. The same term priced at 3.08% a year ago.
- 5-year adjustable-rate mortgages priced at 2.88% with an average 0.5 point. Last year at this time, the same ARM averaged 2.96%.
“Since jumping 11 basis points on May 18th, the 10-year Treasury yield has leveled off around 1.85%. Mortgage rates continue to adjust to this new level with the 30-year fixed rate inching up another 2 basis points this week to 3.66%,” Sean Becketti, chief economist for Freddie Mac, said in a news release. “Recent statements by the Fed appear to have persuaded the market that a rate hike may come sooner than later. However, the market is fickle, and Friday’s employment report has the potential to swing opinion 180 degrees in the other direction.”
Meanwhile, mortgage application volume fell 4.1% from one week earlier, according to the Mortgage Bankers Association report for the week ending May 27, 2016.
Purchase applications were down 5%, as refi applications sagged 4%. Overall, home purchase loan applications remain 28% higher than the same week one year ago.
House flipping hits 2-year high
Fans of HGTV know that it takes a bit more than a fresh coat of paint and some clever home staging to flip a house for profit. But house flipping — considered two arms-length sales within a 12-month period — rose to a two-year high in the first quarter of 2016.
RealtyTrac examined property sales in 950 counties, representing more than 80% of the U. S. population, and found 6.6% of all single-family home and condo sales were flips.
“In the first quarter, 71% of homes flipped were purchased by the home flipper with cash — compared to only 37% who purchased with cash at the height of the flipping boom,” Daren Blomquist, senior vice president at RealtyTrac, said in a news release. “Spending their own money rather than other people’s money is keeping flippers conservative. On average, they are buying the homes they flip at a 27% discount below full market value and selling them at a 6% premium above full market value, helping to deliver strong flipping returns on average.”
House flipping hit all-time highs in Baltimore; Buffalo, New York; Huntsville, Alabama; New Orleans and York-Hanover, Pennsylvania. Other markets where house flipping has climbed to new highs since home prices bottomed in 2012 include Seattle; Virginia Beach, Virginia; Bakersfield, California; and San Diego.
Homes flipped in the first quarter yielded an average $58,250 gross profit — nearly a 48% return on the original purchase price.