The report by RealtyTrac found that home flipping in 12 active metropolitan areas last year was above a peak set in 2005, just two years before the U.S. mortgage market started to collapse, leading to a banking crisis and the Great Recession.
Profits generated by home flipping also hit a 10-year high, with home flippers netting an average $55,000 per sale before renovation and transaction costs. Profits topped $100,000 in expensive markets such as New York and Los Angeles…
There were also indications smaller investors were starting to pile in on the action. The number of home flippers rose to levels not seen since 2007, while the number of home flips per individual investor fell at the same time.
“When home flipping numbers go up, it is usually an indication that the housing market is in trouble,” said Matthew Gardner, chief economist at Windermere Real Estate, who was quoted in the report.
I blame HGTV. Seriously though, hasn’t there been a shift in the last decade or so to seeing house flipping as a more normal business that many people could get into? I hear radio ads regularly in the Chicago area for house flipping seminars where supposedly anyone can show up and learn the secrets. On one hand, you have professionals and firms that do this on a mass scale but you also have an increase in the number of flippers as people take on these projects to make some extra money or start a new business.
If this is pushing us toward another burst housing bubble, is there any way to reign in the flippers? Could local governments institute more regulations that would slow this down?