Flipping is the term used when an investor purchases a property, renovates and repairs it, and then re-sells it within a short period of time for a profit. Flipping was at an all-time high before the housing bubble burst because of easy access to credit and speculation for higher home prices. Now home prices have been appreciating at a relatively high rate for almost four years, and in fact, have reached new highs in some states. So, what is the level of flipping activity? Has it come back and in which markets? Using more than 100 million residential property public records, new analysis from CoreLogic shows the markets in which the level of flipping activity is high and the markets in which it is low1. In Part I of this series we will focus on the national-level analysis, and in Part II we will zoom in on metro areas.
At the national level, the ratio of homes that are flipped among all home sales stands at 4.4 percent as of Q1 2016, which is well below its peak value of 6.4 percent in Q1 2005, as shown in Chart 12. However, the number of flips has dropped more than 70 percent from its peak value in Q2 2005 because the number of home sales in Q1 2016 was much less than the number of homes sales in Q2 2005.
Nationally, in Q1 2016, the median gross profit per flipped property is $56,000 which is about 17 percent higher than its peak value of $48,000 prior to the housing crash in Q3 2005, as Chart 2 shows. On the other hand, the median percentage gross profit has declined to 41.1 percent since its peak value of 47.7 percent in 2009. The decline of the percentage profit might be the result of the decline of the share of distressed sales. An earlier CoreLogic Insight blog posted by Molly Boesel indicates the share of distressed sales has declined significantly and is slightly above 11 percent in January 2016.
Moreover, it takes longer to flip a property now than before the housing crisis. As Chart 3 shows, prior to the housing bubble burst, the peak average time to flip a property was 150 days in Q2 2006. Now in Q1 2016 it takes 154 days on average to flip a property and it appears to be still trending up.
1 A flipped property is defined as a property that is bought and sold within nine months.
2 Non-disclosure states are not included in the analysis.
© 2016 CoreLogic, Inc. All rights reserved.