Home flipping surged to a two-year high during the first quarter, according to RealtyTrac’s U.S. Home Flipping Report.
About 43,740 single-family homes and condos were “flipped” in the first quarter, according to the report. That’s about 6.6% of all sales. It’s also an increase of 20% compared with the fourth quarter of 2015 and an increase of 3% compared with the first quarter of 2015.
RealtyTrac says it was the highest rate of home flips since the first quarter of 2014.
The firm defines a “flip” as an arms-length sale that occurred for a second time within a 12-month period.
Although flipping increased to 6.6% of all sales in the first quarter, the share of flips didn’t come close to the 9.0% share seen during the peak of home flipping in the first quarter of 2006.
“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,” says Daren Blomquist, senior vice president of 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 percent 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 adds. “In the first quarter, 71 percent of homes flipped were purchased by the home flipper with cash – compared to only 37 percent 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 percent discount below full market value and selling them at a six percent premium above full market value, helping to deliver strong flipping returns on average.”
For more, including a breakdown of markets that saw the most flips during the first quarter, click here.