Published October 22, 2021
More People Are Flipping Houses; Is This a Good Thing?
The housing market attracted a lot of attention in 2021. The COVID-19 pandemic created unique conditions for houses to appreciate significantly in value. There were a lot of people looking for a new home, mortgage rates hit historical lows, and the pandemic impacted the supply of new construction homes that are available. This drove up housing prices quickly, causing more people to think about flipping houses.
It is true that it is difficult to find an inexpensive house to buy, fix up, and flip in the current market; however, those who are able to do so might make a significant profit.
Why are more people flipping houses right now, and is this necessarily a good thing?
What Does it Mean To Flip a House?
First, we need to discuss what is meant by the term flipping a house. Flipping a house refers to the process of buying a house and selling it quickly without the intention of ever living in it full time. There are some people who purchase property, hold it for a short amount of time, and then sell it to make a profit.
There are other people who might purchase a house for a low price because there are a lot of repairs that need to be done. Then, the new owner may complete all of the repairs before trying to sell it to someone else for a significant profit.
There are plenty of options available regarding flipping houses, and this has become more popular during the past year because of the rapid increase in home values.
The Sale of High Priced Homes Is Going Up
The sale of high-priced homes is going up. According to information
that has been published by the National Association of Realtors, the sale of homes better priced under $100,000 has dropped by more than 20 percent when compared to numbers one year ago. On the other hand, sales of homes that are priced between $500,000 and $750,000 have gone up by more than 60 percent.
Furthermore, the average price of a home that was flipped was $240,000 during the third quarter of this year. What these numbers show is that the average sale price of a house is going up, meaning that there are opportunities for house flippers to make a profit.
The Average Difference Between the Buy and Sale Price of a Flipped Home Is Going Up
In addition, the average difference between the purchase price and sale price of a flipped house has gone up as well. During the second quarter, the average price difference was $69,000. During the third quarter last year, the average difference was $61,800. Now, the average difference is more than $73,700.
Even though this is a significant profit, this number does not include the cost of any renovations or repairs. Overall, this shows that individuals who flip houses have the opportunity to make a significant profit.
Rising Home Values Are Having an Impact on House Flippers
During the few years prior to the pandemic, the average profit made on a flipped house had been shrinking because home values were not going up as fast. Now, profits from house flipping are going up quickly due to pent-up demand. When this is combined with an increasing number of people looking for houses in the suburbs, property values in those locations are rising quickly. House flippers are capitalizing on the opportunity to make significant profits. Low interest rates and low inventory numbers are further fueling the demand for homes, driving up profits even further. It will be interesting to see what happens to the house flipping market if demand starts to cool off.
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