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People who flip Albuquerque homes for quick resale find they have to slow down
Photo by Michael J. GallegosTribune
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Scott Koch (right) gets help from Justin Barron installing new kitchen countertops in a Northeast Heights house Koch and his father recently purchased for quick resale. In Albuquerque, though, houses are staying on the market an average of 76.3 days, about 10 days longer than in the same period in 2006.
Photo by Michael J. GallegosTribune
Tribune
House shoppers Jimmy Wang (left) and his mother, Chiouing Ristau, tour homes for sale in the Sierra at the Trails subdivision on the West Side. With home sales all over the country drooping in recent months, Longford Homes chose to auction off a number of houses, including this one, last month at discount prices.
Photo by Michael J. GallegosTribune
Tribune
Construction worker and real estate broker Scott Koch carries a kitchen countertop into a house on the 1100 block of Muriel Street Northeast that he and his father, Duane, bought with the intention of selling it soon. Such quick sales, called home flipping, have slowed with the downturn in the housing market.
By the numbers
Real estate professionals in Albuquerque say the housing market downturn has not hit as hard in the Duke City as in other parts of the country, but a slowdown in business has been evident for some of them.
Here's a comparison of the sales of detached, single-family homes for July, August and September of 2006 and the same months in 2007 :
New listings: 6,954 in 2006; 7,484 in 2007, a 7.6 percent increase.
Total active listings available: 12,119 in 2006; 18,234 in 2007, a 50.5 percent increase.
Closed sales: 3,239 in 2006; 2,541 in 2007, a 21.5 percent decrease.
Average days on market: 66 in 2006; 76.3 in 2007, a 15.6 percent increase.
Average sale price: $233,463 in 2006; $245,948 in 2007, a 5.4 percent increase.
Source: Albuquerque Metropolitan Board of Realtors
Subprime slam
The downturn in the national real estate market has been attributed in part to a 2006 spike in the number of homeowners defaulting on adjustable-rate home loans.
The loans, obtained through subprime mortgage lenders, are considered higher risk and became unaffordable for many people who took them.
The nonprofit Center for Responsible Lending estimated that by 2006, 2.2 million households in the subprime market had lost their homes to foreclosure or had loans that would fail over the next several years. It puts the cost of these foreclosures at $164 billion.
The defaults have led to lenders adopting stricter loan terms, which has made it harder to obtain credit and helped slow down home sales.
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Over the past four years Travis Thom has bought and then sold about 20 houses for a speedy profit.
That strategy worked when the Albuquerque real estate market was hot, but it's on hold for the time being, says Thom, a real estate broker, owner of Venture Realty Group in Albuquerque and a so-called home flipper.
"I am kind of waiting on the sidelines with a few other people," Thom said.
"There are other ways in real estate to make money, and I think you just need to be very strategic and very patient when buying now."
Compared with other parts of the country, Albuquerque has weathered the shock of a slowing housing market fairly well, those in the industry say. But the storm in the subprime mortgage industry has brought changes in the most recent quarter:
• More houses are on the market, and they're staying there longer.
• The number of closed sales is down.
• Sellers are throwing in extras like appliances and Disney furniture for children or trying unusual approaches like auctions to get balking buyers to close the deal.
• Investors looking to flip properties for a profit are playing it cautiously.
Part-time home flipper Duane Koch said he learned a lesson this year about investing in higher-priced properties.
Koch, whose main work is installing radiant heating, has flipped homes for about five years, pulling in an extra $20,000 or so annually that he said he puts toward retirement and amenities. The flooded real estate market means he now has to pick his fixer-uppers carefully, he said.
"There's still money to be made out there, but you've got to be able to buy them right and sell them at a reasonable price," Koch said.
He found trying to renovate and sell higher-end homes — those in the million-dollar range — far more challenging than tackling homes in the $150,000 to $300,000 range.
"We can still do the smaller-priced homes, but the bigger stuff is not selling," he said. "I'm sticking to the low ones from now on."
Thom, also a part-time home flipper, has used a similar strategy for the 20 or so homes he has bought and sold in the past four years.
"We chose properties that were under $300,000," Thom said. "We knew the market for that range was healthy."
What isn't as healthy as usual is the speed at which a house is sold. Thom expected it to take 90 days to sell a house on Vassar Drive Southeast that he recently bought and renovated with his girlfriend.
That's a month longer than usual, he said, which he attributes to mortgages being harder to come by and the large number of houses on the market.
"You're competing with 25 to 30 homes that are the same square footage and the same price, and they have the same kind of finishes," Thom said.
"If you're not at your exact bottom line of your selling price, it's going to take you another four months to sell, just because people are becoming very competitive."
Realtor Chris Pino said he has also had to be more patient.
Pino, who has worked at Bruce Caird Realty for five years, said about half of his job involves tracking down homes that investors can fix up and quickly sell. In the past, such sales would take three months, but Pino now estimates 12 months.
"I've never seen it this slow," he said. "There's just not very many buyers right now. People are not making decisions."
Despite the market's challenges, Thom said he's still passionate about the real estate business. He wants to create custom homes from the ground up and work on developing communities. Flipping homes, however, is taking a back seat for now.
"There's always going to be a need for shelter, and there's always going to be a need for someone to sell it," Thom said. "I don't think I'd ever get out of this business."
