Home Flipping in Fresno is Still Hot!

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