While most home flipping right now is staying relatively conservative, excessive flipping can spell trouble for the housing market
Home flipping has hit a two-year high, according to new data from real estate analytics firm RealtyTrac.
According to RealtyTrac’s latest U.S. Home Flipping Report, 6.6% of all single-family home and condo sales in the first quarter of 2016. That’s a total of 43,740 homes, a 20% spike from the previous quarter, a 3% gain from a year ago and the highest rate of home flips since the first quarter of 2014.
The home-flip share of total home sales was still 26% below its peak of 9% in the first quarter of 2006, according to RealtyTrac. But it was 55% above the recent low of 4.3% in the third quarter of 2014.
Darren Blomquist, senior vice president at RealtyTrac, warned that a big spike in home flipping wouldn’t necessarily be a good thing for the housing market.
“After faltering in late 2014, home flipping has been gaining steam for the last year and a half thanks to falling interest rates and a dearth of housing inventory for flippers to compete against,” Blomquist said. “While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets.
“The good news is that — despite the 20 percent jump in the first quarter — home flipping nationally is not far above its historic norm, and home flippers in most markets appear to be behaving rationally and responsibly,” Blomquist added. “In the first quarter, 71% of homes flipped were purchased by the home flipper with cash — compared to only 37% who purchased with cash at the height of the flipping boom. Spending their own money rather than other people’s money is keeping flippers conservative. On average they are buying the homes they flip at a 27% discount below full market value and selling them at a 6 percent premium above full market value, helping to deliver strong flipping returns on average.”
According to RealtyTrac’s latest U.S. Home Flipping Report, 6.6% of all single-family home and condo sales in the first quarter of 2016. That’s a total of 43,740 homes, a 20% spike from the previous quarter, a 3% gain from a year ago and the highest rate of home flips since the first quarter of 2014.
The home-flip share of total home sales was still 26% below its peak of 9% in the first quarter of 2006, according to RealtyTrac. But it was 55% above the recent low of 4.3% in the third quarter of 2014.
Darren Blomquist, senior vice president at RealtyTrac, warned that a big spike in home flipping wouldn’t necessarily be a good thing for the housing market.
“After faltering in late 2014, home flipping has been gaining steam for the last year and a half thanks to falling interest rates and a dearth of housing inventory for flippers to compete against,” Blomquist said. “While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets.
“The good news is that — despite the 20 percent jump in the first quarter — home flipping nationally is not far above its historic norm, and home flippers in most markets appear to be behaving rationally and responsibly,” Blomquist added. “In the first quarter, 71% of homes flipped were purchased by the home flipper with cash — compared to only 37% who purchased with cash at the height of the flipping boom. Spending their own money rather than other people’s money is keeping flippers conservative. On average they are buying the homes they flip at a 27% discount below full market value and selling them at a 6 percent premium above full market value, helping to deliver strong flipping returns on average.”
