House flipping saw a major comeback in 2016 and has since kept the momentum to an extent. This trend that involves purchasing a revenue-generating asset only to quickly resell it for profit after making some repairs had fallen out of fashion for many years before 2016. Home buyers were mostly into living in the properties they purchase. That has since changed.
What statistics say
Trulia reports that flipped homes made up more than 6 percent of all property sales in 2016. The residential real estate website attributes this surge mainly to the rapidly rising home prices nationwide.
Such price increases give home flippers the potential to make large profits, plus good protection against losses. In cases where the resold house does not fetch the amount intended, the investor still stands to enjoy considerable gains in equity on the property.
As of mid-2017, soaring rents and an improving economy were driving many families into buying homes instead of renting. This only served to create a growing appeal among investors to flip properties for profit.
This report from CNBC provides additional clues on what has furthered the demand for flipped homes: lack of homes available for sale. With rents at an all-time high and the number of homes available for sale steadily falling, families are left with little choice but the flips, leading the demand for these properties to hit the roof.
Trulia further notes that investors are taking a more active approach with their flips – buying homes and adding value to them by making a few improvements before reselling them soon after. This method is as opposed to speculative flips whereby investors would buy houses and live in them for a while as they wait for prices to go up.
Overall home flipping growth not stalled by Q2 2017 plateaus
Statistics from ATTOM Data Solutions indicate that national home flipping rate was down to 5.6 percent in Q2 2017 from the previous quarter records of 6.9 percent. Despite these declining national trends, the local markets saw overall home flipping rates increase 53 percent.
According to the ATTOM Data Solutions report, 54 metropolitan statistical areas constituting 53 percent of the aggregate 101 metro areas that the curator analyzed posted a year-over-year growth in home flipping rates in Q2 2017.
Baton Rouge, Louisiana was up 72 percent; Rochester, New York was up 39 percent; Daphne-Fairhope-Foley, Alabama was up 29 percent while New York and Modesto, California both posted a 24 percent increase in home flipping rates.
Birmingham, Alabama; Grand Rapids, Michigan; Dallas-Fort Worth, Texas; Oklahoma City, Oklahoma; St. Louis; Providence, Rhode Island and Cincinnati, Ohio are some of the other markets where the Q2 2017 home flipping rates increased at least 10 percent from the previous year records.
The report considers the increased financing for flipped homes to be largely responsible for this upward trend. By the second quarter of 2017, more than 35 percent flipped homes were bought by financing from sources like homeloansforall.com. This was the highest level of such financing since Q3 2008.
While there are many regions across the US where buy-and-hold investments are still quite the popular trend, the recent year-over-year rise in home flipping only serves to pass flipping as the popular trend in the real estate industry right now.