Profit Killing Mistakes For Flippers

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Home Flipping in Fresno is Still Hot!

In early 2016, Trulia ranked Fresno as the second hottest house flipping market in the nation. At that time, flips comprised 7.6 percent of the local real estate market. This year, Fresno remained within the top five most active flipping markets nationwide. Fresno flips grew .3 percentage points over the past year and now comprise 8.2 percent of all homes on the market.

National home flipping activity saw its first uptick in three years to reach 6.1 percent of the market. Meanwhile, home prices rose the most since 2006 at 5.9 percent year-over-year growth. That is the largest year-over-year home price jump seen since the mid-2000s.

Fresno Flips and Home Prices

Flipping is regarded as both positive and negative for the housing market. On one hand, more investors in your area likely means you reside in a strong housing market with profit potential. But, when flipping becomes too prevalent, it promotes inflated home prices. This can lead to an overheated market, which can eventually turn into the dreaded bubble.

Flippers target emerging markets because rising home prices act as a safety net in case renovations fail due to budget or zoning issues. However, when many investors purchase large portions of the real estate stock and sell them off quickly at higher prices – without improving the structure itself – the overall market becomes more expensive. In a housing market bubble, homes cost more than their true value. Ordinary buyers pay premiums, and if the bubble bursts, end up underwater on their mortgages because they owe more than their home is worth.

However, Trulia’s economists say the current flipping market in Fresno isn’t cause for concern. Fresno home prices grew 4.5 percent over the past year, so it’s not much of a surprise that flipping is hot. Plus, Fresno is far off from its flipping peak in 2013. Just four years ago, flips comprised 9.5 percent of the total real estate market.

In addition, the correlation between growing home prices and rising flipping activity is not as strong as it was in previous years – particularly periods where the market was severely down or largely overvalued. After home prices bottomed out in 2013, the relationship between flipping and home prices peaked at 0.6 on a scale of -1 to 1, where both extremes indicate a strong relationship. Today, the correlation is a healthy .25, considerably softer than it was during the bubble years when the relationship floated between 0.5 and 0.6.

Controlled and authentic home flipping offers benefits for many home buyers in Fresno. With a greater selection of renovated properties, buyers avoid the headache of undergoing repairs on their own time.

By Jennifer Riner, Trulia

Fresno Home Flipping Is Still Popular

According to Trulia, Fresno is among the best cities for flipping houses. House flipping is a practice that some believe is an indicator of an over-heated housing market. Nationally, it made up a stable of all home sales during the past year, mirroring a steady increase in home prices.

House flipping is a unique housing market metric for two reasons. First, it is a speculative undertaking where investors are betting on turning a profit, and has historically occurred at high rates just before a market peaks. Second, flipping usually entails removing a home from a particular price point in the market and moving it to a higher price point through improvement. That movement creates competition for homebuyers who may be looking to build sweat-equity on their own. But flipping activity also provides improvements to the housing stock for buyers who don’t have time or cash to improve a home themselves.

In the third quarter of 2015, flipping activity held steady year-over-year at around 5% of all home sales. This is down from a peak of 8.6% of all home sales in the first quarter of 2006, but up from a low of if the third quarter of 2008. Why has flipping peaked and troughed over the years? Intense home price fluctuation due to the Great Recession. Selling houses for a gain over a short period generally requires modest price growth at minimum. Even though flippers can add value by improving the quality of a home, rising prices provide a safety net when taking on a project. When prices are rising faster, flippers have greater opportunity to come out ahead even if the project doesn’t go according to plan. Over the past year, price gains have remained relatively stable, and so have flips. This is stark contrast to rising year-over prices from 2003-2006, when flips increased sharply from 5% to nearly 9% of all home sales.

Though flipping has remained relatively stable nationally, flipping activity varies significantly across individual markets. Las Vegas, Nev. leads the pack with 10.4% flips, followed by Fresno, Calif. and Daytona Beach, Fla., with 7.6% and 7.3%, respectively. Detroit and Louisville, Ky., have the lowest share of flips at less than 2.5%. – See more at: http://www.trulia.com/blog/trends/flipping-point-2016/#sthash.ZHMZGBOK.dpuf