How tech jobs helped Rust Belt become house-flipping hotspot
n the run-up to the 2008 financial crisis, millions of amateur investors kept adding fuel to the overheating US housing market by betting on quick profits in hotspots like Las Vegas or Miami. A decade later, house-flipping is making a comeback, but this time in some Rust Belt cities the last boom passed by.
Not only the scenery has changed. Today’s house-flippers — those buying properties and selling them within 12 months — are mainly contractors and professional renovators who buy rundown properties in promising neighbourhoods and fix them up, boosting the resale value.
In contrast, those who contributed to the speculative frenzy of the early 2000s would typically take out a mortgage to buy a home, perhaps give it a new coat of paint, wait for prices to rise enough to cash in and do it over again.
Today, old industrial cities such as Pittsburgh, Buffalo and Cleveland are among those offering the greatest returns. They have struggled to recover from the recession, but now are beginning to attract tech firms, such as Google-parent Alphabet Inc, Uber Technologies Inc, and Amazon.com Inc.
The influx of new workers is boosting demand for urban homes in areas that have some of the oldest housing stock in the nation and not much new construction, creating richer opportunities for flippers than in Las Vegas or Miami at the height of the housing boom more than a decade ago.
“Even at their peak in terms of home flipping profits, these two markets never came close to the potential returns available now in Pittsburgh,” said Daren Blomquist, senior vice-president at real estate tracking firm ATTOM Data Solutions.
In Pittsburgh, home flippers made a gross profit of 162.7 per cent on average during the second quarter of this year, while in Buffalo, the average gross return came in at 107.5 per cent, according to ATTOM data. Nationally, the average house-flipper earned a 44.3 per cent gross return on investment this year, compared with the 35.3 per cent during the boom.
While house-flipping is more lucrative than before, stricter lending rules mean fewer would-be investors can afford to join the fray. Nearly 48,770 single family homes were flipped nationwide in the second quarter of this year, about half of the number during the peak of the house-flipping craze in 2005, according to ATTOM data.