Even though the national percentage of houses flipped during the fourth quarter of 2018 was nearly as high as the percentage flipped during the first quarter of 2006, a study suggests the projects are less risky to the economy than nearly 11 years ago.
A story on the front page of the Wall Street Journal today quotes a study by CoreLogic Inc. that says 10.6 percent of houses sold in the United States during the last quarter of 2018 were flipped, compared to 11.3 during the first quarter of 2006. Flipped houses are defined as being owned for less than two years. However, since the average profit margins were nearly three times greater in 2018 than in 2006, the investments are less likely to cause market volatility if home prices “flatten or fall.” Flippers made a median profit of almost 23 percent in late 2018 compared to 9 percent in the first quarter of 2006, the WSJ article stated.
Another difference between the two periods, according to CoreLogic Inc. data, is that professionals handled nearly three times more of the house flipping market in 2018 as they did during early 2006. CoreLogic concluded that professionals are focusing on increasing the value of the properties and providing move-in ready homes for consumers rather than trying to make quick profits.
Because flippers compete with first-time home buyers for older homes, the WSJ article stated, they help drive up prices of starter homes. However, flippers may also increase inventory for buyers who don’t have the skills or extra funds to fix up houses in need of repair.
