House flipping is back, with all its opportunities and risks

The trend of buying a fixer-upper, making some repairs and “flipping” to a new buyer quickly is making a return to real estate markets, years after the trend fell out of fashion with home buyers.

More than 6 percent of home sales last year were “flips”, according to a new report from Trulia. The real estate data website defines a flip as the selling of a home at least twice within a year.

That’s the highest number in a decade, before the real estate bubble burst and the financial crisis of 2008. So could the housing market flip out again?

“When you see flipping reach ten-year highs, economists like us start to worry a little bit.” Trulia’s Chief Economist Ralph McLaughlin told CNBC’s “On the Money” recently.

“We think it’s a little bit different this time ,” McLaughlin added, “because we think more flips are actually value-added improvements that investors are making to the house, rather than speculative flips which is basically someone buying and sitting on a home waiting for the prices to rise.”

But like the mid 2000’s, home prices are rising. “Price increases in 2016 were the quickest in about 3 to 4 years,” McLaughlin said, adding that gives flippers a potential layer of protection.

A 'bank-owned' sign sits outside a foreclosed home in the Mountain's Edge neighborhood of Las Vegas, Nevada, in 2010.

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Posted on February 6, 2017 at 8:14 pm
Kathy West | Category: Buying a Home, Selling a Home | Tagged , ,