Flipping back in a big way thanks to high home prices
Posted March 7, 2016
After four years of fading, home flipping is back in a big way.
Despite the uptick, the increase in the flipping market may be a warning sign for the still-recovering housing market.
House flipper Sasha Moise says high house prices are bringing flippers back.
"I don't think I've seen them this high in quite a while," he said.
The high prices are luring flippers back in the door of a fast-pace renovation game that all but disappeared during the Great Recession. Active flippers are now at the highest level since 2007.
Almost 180,000 single-family homes and condominiums were flipped in 2015, according to Realty Trac.
Flips made up 5.5 percent of all home sales last year, the first increase in four years.
"I think it's incredibly saturated, honestly. There have been a lot of people who are getting into this business because they've seen it as a safe place to put their money," Moise said.
Profits are growing, too. Home flipped in 2015 yielded an average gross profit of $55,000 nationwide, the highest since 2005.
Investors are seeing top returns in Pittsburgh, New Orleans, Philadelphia, Cincinnati and New Haven, Connecticut.
Nationally, returns are close to 46 percent, up from 35 percent in 2005, when flipping was at its peak.
Experts say house flipping tends to artificially inflate home prices, and some believe flipping can be a sign that prices are already too hot because everyone wants to get in on the potential profits.
"The market is becoming overvalued, but we are not in a bubble. If we look at the differences between today and the mid-2000s, it was driven by speculative activity, lots of highly leveraged and equity extraction," Sam Khater, with CoreLogic said. "Most of those factors are not there today."