There has been a lot of discussion lately on the status of flips in the housing market. Is flipping down? Is it dead? A recent Trulia study found that despite a drop in flips over the past several years, flipping is still a viable real estate investor strategy and is actually making a comeback in certain markets, including Las Vegas and Miami.
The flip rate is now back to pre-recession levels of around 5% of all home sales nationwide, a significant decrease from the high of 8.6% seen in the first quarter of 2006. Trulia found that as home prices fluctuated through the Great Recession, flipping followed suit. Why? As prices rise, flippers tend to be more optimistic about a flip and feel there is a safety net if the project does not meet expectations.
Flips were highest in Las Vegas at 10.4 percent, followed by Frenso, Calif. At 7.6 percent and Daytona Beach, Fla. At 7.3 percent. Detroit was the market with the lowest percentage of flips at just 1.1 percent. The market with the most substantial increase in flips over the past year was Miami, with an increase from 4.7 percent to 6.4 percent. Several Florida markets also saw an increase in flips in 2015.
After researching markets across the United States, the study found that “places with the biggest increase and biggest decrease in flipping activity over the past year experienced higher than normal price gains.” They attribute this trend to what is needed for successful flips, namely, a market with appreciating home prices, a large supply of cheap homes and a large number of buyers for homes.
They defined a flip as a houses that was sold twice in a 12-month period with both transactions considered arm’s length. They also did not include foreclosure or forced sales in the study. They determined that flipping is still going steady in many markets, and some could soon hit record highs.