We’ve seen the reports, and can attest to the fact that the housing market is on the rise! Home prices are rising based on the limited inventory on the market. There are few homes on the market with a decent margin profit thus, these properties are getting multiple offers. The appeal of house flipping has grown drastically over the year, which attributes to the growing number of home flippers over the past decade.
According to RealtyTrac, an estimated 180,000 homes and condos were flipped in 2015 and attributed to 5.5 percent of sales. Senior vice president at RealtyTrac made a statement in an article for cnbc.com, “As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon,”. Such attention to these more affordable listings, has caused concerned over rising prices. While there’s more interest in these “fixer uppers”, it’s created a frenzy in acquiring properties.
There’s further concern surrounding these flips. First-time home buyers are already at an all-time low, due to competing expenses and inventory. With home flippers after those same affordable listings as first-time buyers, it could potentially push them further away.
In the article for cnbc.com, according to RealtyTrac, in 2015, homes flipped averaged a gross profit of $55,000. That’s a 46 percent return on investment, compared to 35 percent in 2005. Flips, which is defined as a home that is bought and then sold again within 12 months, could potentially inflate home prices across the country. Matthew Gardner, chief economist at Windermere Real Estate, suggests in an article for housingwire.com, that home flipping causes a problem, “these sales artificially inflate home prices, making housing even less affordable for buyers and increasing the risk of a bubble.”
While home prices are still relatively low, those looking to flip should invest. Various reports suggest this frenzy will inevitably cause a drastic inflation, which will ultimately decrease the return on investment you’ll see. Whether you’re looking for a property to flip or looking for your first home, be sure to do so within the next couple of months!