A new study released by a real estate information company in the United States has found that more and more people in leading housing markets in the country are engaging in home flipping, where they buy properties and resell them in order to make a quick profit.
RealtyTrac revealed on Thursday that the occurrence of home flipping in 12 of the United States' greater metropolitan areas has increased in 2015. Figures from last year hit peak levels that were set in 2005, two years before the mortgage market in the country collapsed, resulting in the Great Recession.
The report also highlighted the increase in profits made through home flipping, which ended up reaching a 10-year high. People who engaged in the strategy were able to earn as much as $55,000 for every sale, excluding costs for the transaction and renovation of the property.
In leading housing markets, such as Los Angeles and New York, home-flipped properties ran as high as $100,000.
The prospect of earning more through home flipping has enticed smaller investors to take part in the practice as well. The number of individuals engaged in home flipping last year reached levels that have not been seen in nine years, while the number of home flips for each investor dropped simultaneously.
"As confidence in the housing recovery spreads, more real estate investors and would-be real estate investors are hopping on the home flipping bandwagon," RealtyTrac senior vice president Daren Blomquist pointed out. "Not only is the share of home flips on the rise again, but we also see the flipping trend trickling down to smaller investors who are completing fewer flips per year."
The increasing trend in the number of homes flipped in 2015 has raised concerns about the possibility that local housing bubbles could very well be forming in some areas in the United States.
Economist Matthew Gardner from Windermere Real Estate said that with more people choosing to engage in home flipping, it could mean that the housing market in the country could be in for some trouble.
He explained that property sales made through this practice end up inflating home prices artificially, causing housing to become pricier for prospective buyers and adding to the risk of another bubble.
The RealtyTrac report identified Homosassa Springs, Lakeland and Jacksonville as three metropolitan areas in Florida to have the biggest increase in home-flipped properties last year. Home flips in these areas rose by as much as 40 to 50 percent.
Photo: Taber Andrew Bain | Flickr
