With real estate investing confidence on the rise across the nation, home flipping has made a comeback in many major metros. But some economists are weary about the effects flipping has on local markets. When house flipping increases rapidly or encompasses a large share of the for-sale market, it often leads to an overheated market where home values rise to a point that the typical investor or buyer loses their point of entry.
The good news is many U.S. markets remain balanced – not in the same flipping tendencies they rose to in 2006 when an inflated amount of listings came from quick sales. Nationally, flipping was steady over the past year at 5 percent of home sales, compared to a peak of 8.6 percent in 2006, according to a Trulia study on home flipping rates.
Where is home flipping the highest and where are the rates rising? Check out the markets below.
Best Markets Flip Deals
In Las Vegas, flipping is popular – encompassing 10.4 percent of all home sales. Many economists might argue a larger portion of the market dedicated to home flips is unbalanced or overheated. In 2005, Vegas real estate had 13.1 percent flips out of all home sales. Currently, the market is at 80 percent of its 15-year record share. The fluctuation in flips between 2014 and 2015 was 1.4 percent, making it the second largest shifting market behind Miami.
LA homebuyers might face their fair share of home flips when vetting out their home searches. The share of home flips in the Los Angeles housing market is 6.6 percent, as of the Fall of 2015. However, because LA homes for sale are typically in a higher price tier, these flips may end up taking longer to sell. Other cities facing this issue include San Diego and Denver, two West region housing markets with increasing home values and high entry costs.
With a 7.6 percent share, the Fresno housing market is the second largest in the U.S. with home flips. While the California market is notoriously hot, being located farther from the coast and halfway between the Bay Area and the SoCal market keeps prices down. The median sales price in Fresno is at $194,500, a 3 percent year-over-year drop. While home flips are popular, pricing data doesn’t indicate the flipping trend is increasing home values at harmful levels.
The Miami real estate market has increased 1.7 percentage points in home flips between 2014 and 2015, the highest increase in the nation. In the Fall of 2015, 6.4 percent of home sales in Miami were flips, compared to 4.7 percent the year prior. However, Miami is not close to reaching a bubble by any means, according to Trulia’s economists. It’s less than a third of its peak flipping point of 20.5 percent.
Whether you’re a home flipper, looking to buy a recently renovated property or an economist concerned about an overheating market, keeping an eye on flipping trends is key. Fast-flip markets had the largest average price increases, but low-flip markets also had price increases. Metros with the highest increases and biggest decreases in flipping activity experienced abnormal property value gains – so both ends of the spectrum won.
Jennifer Riner writes about rentals, home improvement, and design for Zillow Group and other partners