House flipping at a healthy peak?

Question

This WSJ articles says the amount of houses being flipped is back to the level it was in 2006, but shouldn't come with a great amount of concern. Also, the #1 market for houses flipped in the last quarter was Birmingham, AL and I'm a little bit proud. This is due to the quantity of turnkey flips here, most likely, though we do have a booming retail flip market going as well.

Thoughts? Is it right to say that we've returned to this percentage of flipped houses being sold, but it is healthy?

https://www.wsj.com/articles/house-flipping-is-back-to-pre-crisis-levels-heres-why-its-less-of-a-concern-11554802201?fbclid=IwAR1EeE6bEow37y4zqT8pc05urZBVg4NfOjURhye3GeOil9Y0MxfFuuBp02I

Scott Mac · Answer

Hi James,

What should be really concerning is the number of times a particular house is flipped in a certain time frame.

There are two scenarios:

1. Mr. and Mrs. I want to own and live here, (or a landlord who wants to own and rent) buys and holds.

2. Another flipper buys and re-flips.

#1 is serving a legitimate market of buyers.

#2 is speculation that leads to a bubble.

Good Luck!

James Rodgers · Answer

@Chris Clothier I thought about copy+pasting it but didn't know if that was ok. It's a great article, was cool to see you quoted.

I think it's healthy because it seems that the majority of activity is driven by value-add strategy and not just speculating on the wave of appreciation.

Chris Clothier · Answer

Unfortunately, unless the BP readers have a WSJ subscription they are not going to be able to read the article.  You might try copying it into the text for readers to read it and comment.  Im not sure if that is allowed by BP or violates some WSJ rules.

I was quoted in the article about the state of the industry.  I'm not sure we are at a peak yet, but the data clearly shows that more homes are bing flipped now than before as far as number of houses.  There is also growth in dollars as the price per home flipped continues to grow as well.

There is a much more professional atmosphere today.  There are more companies involved and investors are buying (in many cases, although not all) a better product further up the chain.  So, the investors who, as the article describes, were lining up to buy a house or four when they had no business buying one house in the first place because they thought they could flip it for a quick profit, are not as prevalent today.  The investors doing a very large portion of the deals are professional in nature leaving lower risk of default or collapse.  So, is it healthy?  Yeah, probably.