CoreLogic data reveals that the nationwide ration of flipped properties to home sales hit 6.2 percent during Q1 2018, matching the post-crash high reached in Q1 2013. However, even as the number of investors flipping homes is increasing, so too are the costs involved in doing so.
A new Insights blog post from CoreLogic examined public records going back two decades, tracking the ratio of flipped homes to traditional home sales. How did CoreLogic determine whether a property was being flipped? For purposes of the study, CoreLogic defined a flipped property as one bought and sold within a 12-month period.
In the early part of 2005, the ratio of flips to sales was just above 8 percent. It bottomed out around 4.5 percent at the end of 2008. Now that ratio has pulled even with the Q1 2013 total of 6.2 percent, the highest its been since the financial crisis.
“The first time it reached this level after the housing crash, home prices had just started to recover, and there were still a considerable number of distressed properties on the market,” states the CoreLogic blog. However, even though the percentage might be the same, the dynamics of the market are very different in 2018 than they were five years ago.
CoreLogic explains, “The share of distressed properties sold has declined significantly, from 30 percent in January 2013 to 4.4 percent at the end of 2017. Additionally, as a result of six years of home price appreciation and limited for-sale inventory, in many areas, home prices have already passed the peak values reached before the market crashed.”
According to CoreLogic, acquisition costs for investors peaked in 2006, dropping to post-crisis lows in 2010 and then beginning a steady climb ever since. “High acquisition cost, tight inventory, and rising flipping activities together point to possible speculation: investors are betting on continuous home price growth,” CoreLogic states.
Flipping isn’t the only angle providing returns to savvy investors. Investment in the single-family rental space also offers ample opportunities. CoreLogic’s Single-Family Rental Index recently reported that high-end rentals (defined as properties with rent prices greater than 125 percent of a region’s median rent) increased 2.4 percent year-over-year, up from a gain of 1.4 percent in February 2017. On the low-price end of the spectrum (properties with rent prices less than 75 percent of the regional median), rent prices increased by 3.7 percent in February 2018, down from a gain of 4.5 percent in February 2017.