From the WSJ:
House flipping, a potent symbol of the real-estate market’s excess in the run-up to the financial crisis, is once again becoming hot, fueled by a combination of skyrocketing home prices, venture-backed startups and Wall Street cash.
After nearly being felled by real-estate forays almost a decade ago, a number of banks are now arranging financing vehicles for house flippers, who aim to make a profit by buying and selling homes in a matter of months. The sector is small—participants say roughly several hundred million dollars in financing deals have been made in recent months—but is expected to keep growing.
In recent months, big banks, including Wells Fargo & Co., Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. have started extending credit lines to companies that specialize in lending to home flippers. Earlier this month, J.P. Morgan agreed to lend an estimated $60 million to 5 Arch Funding, an Irvine, Calif., company that offers financing to flippers, according to people familiar with the deal.
“The floodgates have opened,” says Eduardo Axtle, a 35-year-old former telecom entrepreneur in Oakland, Calif., who has taken out about 50 home loans over the past five years. These days, he is bombarded by unsolicited emails from brokers offering him access to financing.
The number of investors who flipped a house in the first nine months of 2016 reached the highest level since 2007. About a third of the deals in the third quarter were financed with debt, a percentage not seen in eight years.
The market for house-flipping loans in the U.S. is expected to reach about $48 billion in total sales volume this year, the highest since 2006, according to ATTOM.
That’s in part because home prices across the country are rising, reaching levels not seen since before the 2008 financial crisis. Housing also is in relatively short supply. Meanwhile, low interest rates and a surge in demand for homes from institutional buyers have also benefited house flippers.