The first quarter of 2016 was a big few months for home flipping as 6.6% (43,740) of all single-family home and condo sales were flips, a 20% increase from the previous quarter and up 3% from a year ago to the highest rate of home flips since the first quarter of 2014, according to RealtyTrac’s Q1 2016 U.S. Home Flipping Report.
Although there was a 20% quarter-to-quarter jump, the share of total home sales that were flips in the first quarter was still 26% below the 9.0% share at the peak of home flipping in the first quarter of 2006. Still, this 6.6% share was 55% above the recent low point in home flipping — 4.3% of total home sales in Q3 2014.
“After faltering in late 2014, home flipping has been gaining steam for the last year and a half thanks to falling interest rates and a dearth of housing inventory for flippers to compete against,” said Daren Blomquist, senior vice president at RealtyTrac. “While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets.
“The good news is that — despite the 20% jump in the first quarter — home flipping nationally is not far above its historic norm, and home flippers in most markets appear to be behaving rationally and responsibly,” Blomquist continued. “In the first quarter, 71% homes flipped were purchased by the home flipper with cash — compared to only 37% who purchased with cash at the height of the flipping boom. Spending their own money rather than other people’s money is keeping flippers conservative. On average they are buying the homes they flip at a 27% discount below full market value and selling them at a 6% premium above full market value, helping to deliver strong flipping returns on average.”