(Newswire.net — March 18, 2016) — Last year was very good for real estate compared to what we’ve seen in the last decade. Home prices have risen, banks have become more willing to lend, and consumers are more willing to borrow. With this rise in the housing market also comes increased house flipping.
For those who haven’t watched shows on HGTV, house flipping is defined as purchasing a home for a low price, fixing it up, and selling it again within a 12-month period for a higher profit. For some, it’s a hobby, while, for others, it’s a way of life.
The Market Has Flipped
Recent reports are showing that the numbers involved in house flipping, from the number of people involved to the profits made, were the highest they’ve been in nearly a decade, and it’s continuing to grow, according to RealtyTrac. Flipped houses made up 5.5 percent of all property sales last year, and the trade as a whole has increased by 75 percent in the United States. The average flipped home yielded a gross profit of $55,000 nationwide, the highest it’s been in 11 years.
“As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,” said Daren Blomquist, senior vice president at RealtyTrac. “Not only is the share of home flips on the rise again, but we also see the flipping trend trickling down to smaller investors who are completing fewer flips per year.”
This is thanks to a blooming housing market. It’s the steadiest the market has been in a decade, and last year’s numbers show amazing promise for what’s coming in the real estate market. Median home prices were up 7.3 percent last year, which has house flippers and sellers everywhere thrilled at the monetary prospects.
Is This a Good Thing?
For the here and now, house flipping trends seem to be positive. They’re encouraging both buyers and sellers to put more money into the real estate market, which will help to stabilize the economy more than anything.
However, this high may be short lived. The insane success stories of the past are encouraging more and more people to invest, which could lead to oversaturation. Competition may become so fierce that it will be difficult for anyone to make a profit.
The concern is that housing prices are rising too fast to be sustainable. There’s a short supply of homes for sale now, and it won’t last forever. Home flipping can lead to over inflation, pushing prices artificially higher until they break.
“When home flipping numbers go up, it is usually an indication that the housing market is in trouble,” said Matthew Gardner, chief economist at Windermere Real Estate in Seattle, who was quoted in the RealtyTrac report.
Despite risks, there isn’t any imminent danger. “The market is becoming overvalued, but we are not in a bubble. If we look at the differences between today and the mid-2000’s it was driven by speculative activity, lot of highly leveraged and equity extraction, most of those factors are not there today.” says Sam Khater of CoreLogic.
The home flipping trends will likely continue, despite warnings for the future economy. The positive side is a market like this has a natural way of putting things right again. Home prices aren’t in danger of breaking just yet; so for now, it’s best for house flippers and real estate agents to see where this trend goes.