The rising trend of home flipping around the country seen in Q4 continued to build momentum among investors in nearly every market surveyed in Q1, according Auction.com [1]'s First Quarter 2015 Real Estate Investor Activity Report released on Monday.
The percentage of investors surveyed who said they intended to flip the properties they bought rose by 6.5 percent in Q1 from the previous quarter, according to Auction.com. The rise of that trend was especially evident in the Western States, where the ratio of investors who preferred flipping as a strategy over renting was as high as three to one in some places. The percentage of investors in both California and Washington who said they preferred to flip was 75 percent, compared to 24 percent for renting. The percentage of flippers in Nevada and Idaho was 79 percent and 71 percent, respectively.
“It seems clear that the unusually low inventory of homes for sale has led to higher home prices, which makes it challenging for investors to rent homes out at a rate that’s profitable, and still affordable for tenants,” Auction.com EVP Rick Sharga said. "So in states like California, Washington, Nevada, and Arizona a large number of investors have decided that the best opportunity today is to meet the demand of prospective homeowners by buying, fixing, and re-selling investment properties.”
Overall, 53.5 percent of investors surveyed said they preferred flipping, while 44.8 percent said they intended to rent the houses they purchased. A larger portion of real estate investors (55 percent) and investors working on behalf of another investor (66.3 percent) said they intended to flip, while a majority of investors making a one-time purchase (66.9 percent) said they intended to rent.
Auction.com's survey was collected from investors who bid on properties both online and at live events nationwide during Q1. Investors purchasing at live events generally preferred flipping over renting (62.1 percent compared to 36.7 percent), while investors purchasing properties online tended to lean toward renting over flipping (54.5 percent compared to 43.5 percent).
The majority of investors who purchased only one property per year preferred a hold-to-rent strategy (60.8 percent), while more active investors tended to prefer flipping. Fifty-nine percent of investors who purchased between two and 49 properties during the quarter said they intended to flip, as did 53.6 percent of investors who purchased 50 or more properties.
"Historically, individual investors have owned over 95 percent of the single family homes available for rent," Sharga said. "It looks like these investors are coming back to the market, and filling a growing market need for rental units."
Click here for a video commentary [2] from Rick Sharga on the latest Auction.com survey.