House Flipping Rates are on the Rise Once Again
House flipping, defined as selling a house less than a year after purchasing it, has been a popular real estate investing strategy since the U.S. post-recession era. This risk-reward tactic has become an increasingly popular trend, with the number of house flips in the country hitting a six-year high as a percentage of sales during the first quarter of 2018.
According to a recent report from ATTOM Data Solutions, a research firm that analyzes real estate data, there was a 20 percent increase in the flipping of New York homes year over year and a 7 percent increase in Chicago. But due to tight markets in various areas across the country, not all cities saw a rise in home flipping. Out of the 136 markets analyzed by ATTOM Data, 75 saw year over year decreases. Miami experienced a 16 percent decrease in home flips as a percentage of sales year over year, which was the largest decline in the country during the first quarter. Other cities saw smaller decreases, such as Los Angeles, which only experienced a 3 percent decline. Meanwhile, some cities experienced drastic increases in house flipping rates. Lincoln, Nebraska, and Madison, Wisconsin, rose by more than 55 percent, and Baton Rouge, Louisiana experienced a high increase of 70 percent.
The total number of house flips in the country decreased by 4 percent in the first quarter year of year, to just below 48,500 houses. However, this represented an estimated 7 percent of sales, a rate which has not been reached in 6 years (since the first quarter of 2012). Throughout the year of 2017 investors flipped more than 207,000 condominiums and single-family homes, the highest recorded amount since 2006, and the 138,000 investors who flipped their homes was the highest number since 2007, according to Bloomberg.
House flipping has reached an 11-year high since the housing bubble that occurred right before the market crash in the mid-2000s. The rate of house flipping reached a high in 2005; 8.2 percent of home sales sold nationwide were flipped, which equates to 344,000 homes. Because new research shows that flipping contributed to the housing crash, some market watchers are concerned that the recent rise in flipping could negatively affect the economy again. But thankfully, experts say that these concerns are unnecessary, particularly due to changes in the mortgage industry and the now-stabilized real estate market.