Tightening Supply Fuels Home Flippers

Good morning!

As the housing market continues to soar, home flippers are seeing the largest returns in the last 20 years. While the number of homes that were flipped dropped by over 7% last month to 5.1% of overall sales (likely due to the housing shortage we have covered), flippers are seeing an average profit of over $73k on each property. An almost 20% increase in profits from the average flip 12 months ago. In addition to the home shortage, all time low mortgage rates have made leveraged flips much more profitable.

Mortgage backed securities are slightly up as they continue to jump up and down on that 25 dma. This would signal a floating position for us in most cases as there we have a strong floor and a lot of room before the next ceiling. However, many believe that congress will have a proposed stimulus bill by early next week. This will likely rally the stock market and hurt mortgage pricing. We are holding a locking bias.