Wall Street Journal writer Laura Kusisto reported earlier this week that, “House flipping is back to nearly the same level it was around the 2006 peak of the housing boom, when it became a symbol of the rampant speculation that soared before the bubble burst.
“But a new analysis from CoreLogic Inc. suggests most of the current flips are less risky than those more than a decade ago, making today’s flippers less likely to cause market volatility if prices decline in the next few years.
“Some 10.6% of homes sold in the U.S. in the fourth quarter of 2018 were flips, defined as having been owned for less than two years, according to CoreLogic. That is near the level of the first quarter of 2006, when 11.3% of homes sold were flips, and the highest fourth-quarter level in the two decades since CoreLogic started tracking the data.”
The Journal article noted that, “The study, however, shows that flippers today have much larger profit margins than flippers at the peak of the previous housing cycle. By one measure, the trades are more than twice as profitable as the flips made in 2006. That offers current flippers more of a cushion if home prices begin to flatten or fall.”
Ms. Kusisto added that, “Professional flippers can be stiff competition for first-time buyers, helping to drive up the price of lower-cost starter homes. They can, however, also help to create more inventory because many younger buyers don’t have the skills or cash needed to fix up older, dilapidated homes.
“Flipping is becoming more professionalized at the local level, too, including in Memphis, Tenn., which was the second most popular market for flipping in the fourth quarter behind only Birmingham, Ala. The median economic profit for investors in the Memphis area is nearly 42%.”
