During the housing boom that preceded the 2008 financial crisis, house flipping became a symbol of the runaway speculation that led to the economy’s downfall.
Over a decade later, flips makes up nearly as large a share of home sales as they did back in 2006, according to housing analytics firm CoreLogic. But the market has changed in ways that make this less of a concern than in the past, the Wall Street Journal reported.
“Flippers are very different today than they were in the past,” CoreLogic deputy chief economist Ralph McLaughlin told the Journal. “Even though we see hype and hysteria in popular culture, this isn’t necessarily something to worry about.”
CoreLogic found that 10.6 percent of U.S. home sales in the fourth quarter of 2018 were flips, having been owned for less than two years, close to the 2006 house flip rate of 11.3 percent.
At the same time, the median profit for flips today is more than twice what it was twelve years ago, which gives sellers more of a cushion in case of a market downturn. Accounting for overall home price increases, flippers made nearly 23 percent in profit on flips in the fourth quarter. In 2006, that number was just 6 percent.
The market has also become more institutionalized, with corporate sellers making up more than 40 percent of flippers today, the highest rate on record. Companies like Opendoor and units of Zillow and Redfin are all getting into the house flipping game, helping to reduce hassle for sellers.
Nevertheless, the time pressure involved in house flipping means flippers are still more vulnerable than long-term buyers in the event of a downturn, and as more players have begun to enter the space, business is getting more difficult than it used to be.
The most popular markets for house flipping today include Birmingham, Alabama and Memphis, Tennessee. [WSJ] — Kevin Sun